Principal's Duties to Agent. Douglas agreed to buy oil and gas leases for Aztec Petroleum Corp In return for his services, Douglas was to receive an initial $5,000 plus a royalty interest in the leases he obtained. Douglas obtained a number of leases

for Aztec but represented to Aztec that the prices paid for the leases were higher than they actually were. By sending Aztec photocopies of checks altered as to both payee and amount, along with forged receipts, Douglas was able to keep for himself a substantial amount of the money that Aztec had entrusted to him for payment of the leases. Douglas used his money for personal purchases, including two new cars, a boat, and other personal items. When Aztec refused to grant Douglas the promised royalty interest in the leases, Douglas brought suit to obtain it. The trial court held for Aztec, and Douglas appealed. In view of Douglas's deceptive activities, is Aztec required to grant the royalty interest? Discuss fully.

Principal's duties to agent
No. Douglas had breached his fiduciary duty to Aztec, and for this reason, Aztec was not required to fulfill its earlier promise. The court cited the Restatement (Second) of Agency, Section 469, which reads, in part: "An agent is entitled to no compensation for conduct which is disobedient or which is a breach of his duty of loyalty." The court judged that the royalty interest "represented compensation for Douglas for honest and forthright performance of his agency, a duty imposed on every fiduciary . . . . The court's denial of the [royalty interest] to Douglas is a proper legal consequence of his established infidelity."