When does Fiduciary Duty arise?
A fiduciary duty arises from a relationship based on good faith, trust and confidence, and reliance on the fiduciary to exercise his discretion or expertise in acting for the benefit of the client. The purpose of the fiduciary duty is to avoid conflict and not to make any profit or gain any benefit for himself or another, without the consent of the principal or beneficiary.
How do Fiduciary Duties arise?
Fiduciary duties may arise out of contractual (or deeds) or non-contractual undertakings, where one party assumes an express or implied obligation to act in another party’s interests.
Here are examples of non-contractual undertakings out of which a fiduciary duty may arise.
What are some examples of Fiduciary relationships?
- Company director to their company
- Company director to shareholders
- Partners to fellow partnersina formal partnership
- An individual exercising powers of attorney
- Agent to their principal
- Trustee to a beneficiary
- Lawyer to client
- Doctor to patient
- Employer to employee
- Guardian to a ward
- Parent to a child
- Spouses to each other
What is the nature of the obligation?
A fiduciary is held to a high standard of honesty and full disclosure. He must not obtain any personal benefit at the expense of the principal, rather it is the duty of the fiduciary to act in good faith for the advancement of the interests of the principal. It demands loyalty between the parties.
If a fiduciary breaches its duty or obligation, he might be held accountable to the principal for any benefit or gain it received without the principal’s consent. The duty imposed upon a fiduciary is strict.
The only way a fiduciary may escape liability for conduct that amounts to a breach is where the principal or beneficiary consents to such conduct. However, in some instances, even the consent of the principal or beneficiary is not enough to avoid liability.
When does a breach of Fiduciary Duty happen?
Breaches of fiduciary duty usually happen when the actions of a fiduciary are opposite to the interests of the principal and instead, benefit the fiduciary’s interests or the interests of a third party.
A breach can stem from negligence, unlawful use of funds, or failure to provide important information to the principal that could lead to misunderstandings, misinterpretation, or misguided advice. Thus, it is of utmost importance that the fiduciary identifies and discloses any potential conflicts of interest to the principal.
Elements of a breach in Fiduciary Duty
A fiduciary relationship demands that the fiduciary upholds or puts the principal’s interests above his own. Case law establishes precedents and elements for breaches of fiduciary duty.
Generally, the four essential elements of breach of fiduciary duty are duty, breach, damages, and causation. These elements must be sufficiently established by either party to prevail in its breach of fiduciary claim.
Examples of Fiduciary Duty breach
How to resolve a breach of Fiduciary Futy?
As fiduciary relationships go sour, there are various solutions potentially available. Common remedies that can be used to resolve disputes related to a fiduciary breach are:
an order preventing the fiduciary from committing another breach to the suffering party.
How Can Contracts Specialist Help You Move Forward
As your trusted building and construction lawyer, Contracts Specialist ensures that we understand, uphold and observe our obligations with utmost honesty and good faith. We’ll put your interests above our own and will provide full disclosure with the conflicts that may arise when dealing with your situation.
Move forward by:
- Calling us on 02 8096 8576
- Speaking with our Building and Construction Lawyer
- Getting expert advice on your legal options