Which duty obliges an agent to avoid self-dealing and to prioritize the principal's interests?

• A. Duty of care
• B. Duty of loyalty
• C. Pass-through taxation
• D. Estoppel

Answer: (B)

The main concept is fiduciary loyalty: an agent must put the principal’s interests first and avoid any self-serving actions. This duty requires the agent to act with undivided loyalty, disclose and manage conflicts of interest, and not profit at the principal’s expense. Self-dealing—where the agent benefits personally from deals that involve the principal—is a classic breach of this obligation, as is taking opportunities that properly belong to the principal without permission.

In practice, this means an agent should not compete with the principal, should disclose conflicts, and should pursue opportunities only if they’re available to the principal or after obtaining informed consent. The other options describe different ideas: the duty of care focuses on prudent, competent conduct; pass-through taxation is a tax treatment, not a fiduciary obligation; estoppel is a doctrine preventing denial of a fact based on reliance. Hence, the duty that precisely captures avoiding self-dealing and prioritizing the principal’s interests is the duty of loyalty.