Lesson 7: Duties to Clients and Customers

Question 1

secret profit

Answer 1

If an agent profits in some way from a principal’s transaction without disclosing that to the principal, this is a secret profit.

Yet it isn’t improper for an agent to buy the principal’s property and then resell it for a profit, as long as she has the principal’s knowledge and consent. The principal must also be told the property’s true value.

Question 2

Actual fraud

Answer 2

Actual fraud (also called deceit) involves intentional misrepresentation or deception, as in the previous example.

Question 3

Constructive fraud

Answer 3

Constructive fraud, on the other hand, is a misrepresentation resulting from negligence or carelessness, without a fraudulent intent.