A fiduciary duty is an obligation to act in the best interest of another party that arises as a result of the special nature of that particular relationship.
For instance, a corporation’s board member has a fiduciary duty to the shareholders, a trustee has a fiduciary duty to the trust’s beneficiaries, and an attorney has a fiduciary duty to a client.
A fiduciary obligation exists whenever the relationship with the client involves a special trust, confidence, and reliance on the fiduciary to exercise his discretion or expertise in acting for the client. The fiduciary must knowingly accept that trust and confidence to exercise his expertise and discretion to act on the client’s behalf.
When one person does agree to act for another in a fiduciary relationship, the law forbids the fiduciary from acting in any manner adverse or contrary to the interests of the client, or from acting for his own benefit in relation to the subject matter. This is often referred to as the “duty of loyalty.” The duty of loyalty exists alongside the other type of fiduciary duty, the “duty of care,” which entitles a client to the best efforts of the fiduciary on his behalf, and to the fiduciary’s exercise of the skill, care and diligence of a reasonable person acting in their position, when acting on behalf of the client. A person acting in a fiduciary capacity is held to a high standard of honesty and full disclosure in regard to the client and must not obtain a personal benefit at the expense of the client.
Drawn in part from USLegal Inc., Breach of Fiduciary Duty Law & Legal Definition, at http://definitions.uslegal.com/b/breach-of-fiduciary-duty/, accessed 25 January 2016.
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Page created by: Dave Marshall, last modified by Ian Clark on 31 May 2016.
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