Also known as: fiduciary relationships · fiduciary relation · fiduciary relations
Written by attorneys · grounded in primary & secondary sources — see below
A relationship in which one party owes duties of loyalty and care to another. It arises when one person manifests consent that another shall act on the first person's behalf and subject to the first person's control and the second person consents to act.
Amanda directed Luis to handle all interactions with the City of Olympia harbor authority while she was overseas. Luis agreed and negotiated a revised fee schedule on her behalf without prior confirmation. Amanda later denied any agency relationship existed when the city sought to enforce the new terms.
B purchased an automobile from A under a contract later avoided on grounds of infancy. B had paid the full price and sought restitution of the amount conferred through part performance. The court permitted recovery because the avoidance stemmed from abuse of a fiduciary relation.
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Marjorie arranged for the future corporation to license a compound from a venture she secretly controlled on favorable terms. She disclosed the conflict only to the lead investor while other contemplated initial shareholders received no information. The corporation later sought to recover the secret profit.
An officer of a corporation identified a business opportunity within the company's line of business and pursued it personally without disclosure. The corporation claimed the opportunity belonged to it under the fiduciary standard. The court imposed a constructive trust on the profits obtained.
A corporate insider disclosed material nonpublic information to an outsider who then traded on the tip. The outsider knew the information came from a breach of the insider's fiduciary duty. Prosecutors charged the outsider with securities fraud based on the tipper's breach.
Two partners held a lease for a hotel as part of their joint enterprise. One partner secretly obtained a renewal of the lease in his own name after the original term. The other partner claimed an interest in the renewed lease under the fiduciary standard governing their venture.
The relationship requires a manifestation of consent by the principal that the agent shall act on the principal's behalf and subject to the principal's control together with the agent's consent to act. Absence of any understanding about control prevents formation even when consent to act on behalf is present.
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A party who avoids a contract on the ground of abuse of a fiduciary relation may recover restitution for any benefit conferred by way of part performance or reliance. The right exists only if the party would have had a right to restitution had the contract been enforceable.
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A promoter must make full disclosure of any secret profit to all persons contemplated as part of the original financing scheme and obtain their approval. Disclosure to only some initial subscribers is insufficient and permits the corporation to recover the profit or rescind the transaction.
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No fiduciary relationship exists between a promisor or promisee and the beneficiary of a contract. A fiduciary relation arises only between agent and principal or trustee and beneficiary and requires consent of both parties to the relation.
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…as a general proposition, that a person who acquires special knowledge or information by virtue of a confidential or fiduciary relationship with another is not free to exploit that knowledge or information for his own personal benefit but must account to his principal for any profits derived therefrom.” Diamond v. Oreamuno ,…