On top of this duty to act reasonably, the law recognizes another special relationship that arises in certain types of relationships: the fiduciary.
What is a fiduciary?
The role of a fiduciary arises when a party places special confidence in another who, is bound to act in good faith and with due regard for the interest of the party placing the confidence. There are many well-known types of relationships where a fiduciary duty is established: an attorney representing a client, and employee and their employer, as well as a corporate officer and the corporation they serve.
What duties are owed by fiduciaries?
Here are just a few examples of duties that fiduciaries owe:
- Duty of Loyalty: Fiduciaries owe a duty of loyalty to their subjects. This means that they are expected to place the welfare and interests of their subject above their own personal or business interests. They are prohibited from taking actions or forming relationships that would create a conflict of interest with their duty to their subject.
- For example, if an officer of a corporation becomes aware of a business opportunity that the corporation would benefit from, he or she is forbidden to withhold that information from the corporation and pursue that opportunity personally.
- Duty of Care: When acting on behalf of its subject, a fiduciary is obligated to use the utmost care and diligence when acting for the corporation.
- For example, an attorney is required to be diligent in representation of his or her client. If an attorney missing a filing deadline, or otherwise does something that harms the client, they are in breach of their fiduciary duty.