The Duty Of Confidentiality In Real Estate

In any Listing Agreement there is a point in time when the agency relationship ends.

A Listing Agreement, as it is widely known, is none other than a contract between the rightful titleholder of an interest in land (the 'Principal') and a duly licensed real estate firm (the 'Agent'), whereby the firm stipulates and agrees to find a Buyer within a specified timeframe who is ready, willing and able to purchase the interest in land that is the subject matter of the contract while acting within the realm of the authority that the Principal confers onto the Agent, and wherein furthermore the titleholder stipulates and agrees to pay a commission should the licensee ever be successful in finding such Buyer.

As in all contracts, there is implied in a Listing Agreement an element which is commonly know at law as an 'implied covenant of good faith and fair dealings'. This covenant is a general assumption of the law that the parties to the contract - in this case the titleholder and the licensed real estate firm - will deal fairly with each other and that they will not cause each other to suffer damages by either breaking their words or otherwise breach their respective and mutual contractual obligations, express and implied. A breach of this implied covenant gives rise to liability both in contract law and, depending on the circumstances, in tort as well.

Due to the particular nature of a Listing Agreement, the Courts have long since ruled that during the term of the agency relationship there is implied in the contract a second element that arises out of the many duties and responsibilities of the Agent towards the Principal: a duty of confidentiality, which obligates an Agent acting exclusively for a Seller or for a Buyer, or a Dual Agent acting for both parties under the provisions of a Limited Dual Agency Agreement, to keep confidential certain information provided by the Principal. Like for the implied covenant of good faith and fair dealings, a breach of this duty of confidentiality gives rise to liability both in contract law and, depending on the circumstances, in tort as well.