Final answer:
When an agent is paid by both parties in a sales transaction without disclosing their dual agency, it creates a conflict of interest and undermines trust. The agent may prioritize their own financial gain, leading to biased actions. Legal action can be taken if the undisclosed dual agency is discovered.
Step-by-step explanation:
In a sales transaction, when an agent is paid by both parties but fails to disclose their dual agency, it creates a conflict of interest. The agent is supposed to represent the best interests of their clients, but by not disclosing their dual agency, they are not acting in an ethical manner.
Not disclosing dual agency can lead to several consequences. First, it undermines trust between the agent and the clients. Second, it can result in bias towards one party, as the agent may prioritize their own financial gain rather than negotiating the best deal for their clients. Lastly, if the undisclosed dual agency is discovered, legal action can be taken against the agent for breach of fiduciary duty.