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Duty of Care

DEFINITION

The legal obligation of an agent to act in a manner befitting of the goals of the principal including the duty to act on behalf of the principal, rather than in the self interest of the salesperson or broker.

EXPLANATION

The duty of care is the legal principle that requires parties of a business or agency to make decisions on behalf of clients in the best manner possible. The standard to determine whether a party has the made the best decision on behalf of their client is to determine whether their advice or act would be reasonable for most parties in their position. While every business or agency may offer different advice, it is expected that they use due diligence and effort to attain the goals of the party using their services.

In addition to viewing the decisions of the party through the lens of what a reasonable party would do, courts determine whether the advisor put in a good faith effort to advise their client in the manner they did. The slightest breach in fiduciary duty could lead to a valid lawsuit imposed against the business or agency who hired them.

 

Determining Liability

Agents and brokers have an obligation to do research and provide advice based on facts. The standard in determining whether a party has done their due diligence is seeing if the agent or brokers advice could have foreseeably affect their client’s financial situation in a negative way.

There must be no conflict of interest in making recommendations to their client. A conflict of interest could be anything that incentivizes the business or agency to intentionally mislead or provide inaccurate advice to their client. In order to provide a breach of fiduciary duty or intentional deceit, the plaintiff must show the connection and intentional mismanagement of the plaintiff’s situation.

 

Providing Sound Advise

In the context of real estate, the duty of care for real estate agents and brokers involves providing sound advice using comparable and real-world data. It also includes doing a basic walk through inspection for their client to verify the condition of a property their client is purchasing.

Property owners have an implied duty to maintain their properties in a manner that prevents foreseeable accidents from occurring.

 

Reasonable Person

The duty of care standard is tested by determining if the act of the advisor was reasonable to an average person. The term “reasonable person” exists only in law, it is not a real person. A reasonable person is a party that acts with reason, acts carefully, and provides advise only after they have done their due diligence.

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