A basic principle of agency law is that the agent is a fiduciary to his or her principal, Stephenson v Golden, 279 Mich 710, 734-738 (1937), and owes duties of good faith, loyalty, and fair dealing, Burton v Burton, 332 Mich 326, 337 (1952).

The relationship changes, however, in a dual agency situation because the role of a dual agent is limited and consists only of assisting the parties with completion of the transaction according to the terms to which those parties agreed. MCL 339.2517(11)(f). The difficulty is in recognizing when assistance becomes advocacy or when the parties need more from an agent than mere assistance.

Dual agency in the real estate context is recognized, but not well-defined, by MCL 339.2517(11)(f), and is an arguably acceptable means of representing both parties to a transaction. Boss v Tomaras, 251 Mich 469, 472 (1930). An agent's dual representation is not necessarily a breach of duty, but a proper and complete disclosure to the principals is required; the contracting parties absolutely need to know the limits of the agency and what they can expect from the agent. HJ Tucker & Assoc, Inc v Allied Chucker & Egr Co, 234 Mich App 550, 574-575 (1999).

As with all agency relationships, the dual agency arrangement is best defined by a written agreement so there can be little doubt as to what the parties are expecting the agent to do. See Realtors v Rubrick, No 276309, pp 13-14 (Mich Ct App, Nov 20, 2008). The benefit of a properly drafted contract is that the document identifies (or should identify) the scope of the relationship and inform the principals as to that limited scope. The duties that the contracting parties can expect then are those that are within the defined parameters of the relationship. Teadt v Lutheran Church Missouri Synod, 237 Mich App 567, 581 (1999).

This is particularly important with dual agents because, when the parties engage an agent for one purpose (i.e., to act in a dual capacity), those parties cannot require the agent to act outside the scope of the contract requirements. Sherman v Korff, 353 Mich 387, 397 (1958). By accepting the dual agency relationship, the parties acknowledge that the only duty the agent has is “to provide services to complete a real estate transaction.” MCL 339.2517 (11)(f).

Difficulties can arise, however, when it is not clear what a dual agent is supposed to do. A once common problem noted in the case law is a situation when an agent's actions conflict with even the limited duties of a dual agent, for instance, when the agent is to receive some profit from the deal of which one (or both) principals are not aware. Hogle v Meyering, 161 Mich 472, 484-485 (1910). Similarly, an agent cannot misrepresent or conceal material issues, such as the amount at which the seller is willing to sell or that the buyer is willing to buy. Moore v Meade, 213 Mich 597, 607-608 (1921). In both of these instances, the agent was held to not only have forfeited his commission but was obligated to pay damages to the plaintiffs. The main lesson from these cases is that the parties in a dual agency need to know what the agent knows so that the parties alone can negotiate the terms by which they want to contract. In this respect, the dual agent's role is limited to that of an intermediary, passing information from one party to the other.

A more common complaint which arises now is that at least one of the parties is not equipped to understand or manage a real estate transaction without direct guidance from an agent (such as, for instance, a first-time home buyer). While the law can be unforgiving, sometimes it takes litigation through the appellate courts to establish that the dual agent acted as required. For instance, in Vanhellemont v Gleason, No 286350 (Mich Ct App Sep 24, 2009), the plaintiffs became dissatisfied with the terms of the purchase agreement, completed by the dual agent, which they had read, claimed to have understood, and had signed. They nevertheless filed suit on the basis that the agreement did not include terms, alleged by the plaintiff-buyers as material to the deal, and that the agreement was not “buyers-oriented.” The Court of Appeals determined, however, that, because the dual agency was properly disclosed (even though not all that well explained), the plaintiffs received the services they signed up to receive, namely, assistance only in completing the transaction according to the terms of their agreement. If the dual agent had prepared an agreement which favored one side over the other, that act would have been a breach of the limited dual agent duties. Instead, the plaintiff-buyers were the ones solely responsible for making certain that they understood their agreement. Vanhellemont, at pp 12-13.

The preferred route to non-liability, however, is not through litigating these issues and having to resort to the Courts for establishing the parameters of the agency relationship. As with all matters related to real estate transactions, the contract is a critical method for making certain that all parties – agent and principals – understand their respective obligations. If the dual agency agreement plainly states the role of the dual agent, and that the parties are expected to identify and negotiate material terms, that agreement is going to be interpreted and enforced as written.  Wilkie v Auto Owners Ins Co, 469 Mich 41, 62, 63 (2003). This means not only that all the words of the agreement are given effect, Klapp v United Ins Group Agency, Inc, 468 Mich App 459, 468 (2003), but that no duty will be imposed other than as expressly stated in the contract. Zurich Ins Co v CCR & Co (On Rehearing), 226 Mich App 599, 604 (1997).

The importance of the contract cannot be overstated. The agreement is not just a means for limiting liability exposure, but, more importantly, a method for instructing the parties as to the limits of the agency, and what is expected of them when completing the transaction.