What is the duty to disclose material information to the principal?

• A. The agent must disclose information only if the principal requests it.
• B. The agent should disclose information that is favorable to the agent.
• C. The agent should disclose all information regardless of materiality.
• D. The agent must disclose information material to the principal's decisions and actions.

Answer: (D)

In agency relationships, the agent’s duty to the principal includes a requirement to disclose information that could affect the principal’s decisions. This hinges on materiality: information is material if a reasonable principal would consider it important when deciding how to act. The key is that the duty is proactive and about informing the principal, not waiting for a request or only sharing what helps the agent. The agent must reveal information that could influence the principal’s decisions and actions, even if that information is unfavorable to the agent. This protects the principal’s ability to exercise independent control and make informed choices.

So, information that is merely non-material, or information that only serves the agent’s interests or that is disclosed only upon request, does not meet the obligation. The correct standard captures the duty to reveal material facts that bear on the principal’s decision-making process. For example, a broker who knows about a hidden defect or a corporate officer aware of a looming liability must disclose it to the principal so decisions can be made with full knowledge.