Also known as: voidable
Written by attorneys · grounded in primary & secondary sources — see below
A common-law doctrine under which a transaction involving a conflict of interest between a fiduciary and the beneficiary is voidable by the affected party upon a mere showing of the conflict.
Select any source to read its text and confirm it supports the definition.
Victor Vargas, a corporate director, caused Volta Electric to sell industrial equipment to a firm he controlled at an inflated price. Shareholders discovered the undisclosed conflict after closing. The transaction is voidable by the corporation upon a mere showing of the fiduciary conflict.
Vincent Valdez, trustee of a family trust holding commercial real estate, sold a parcel to a company he controlled at below-market value. Beneficiary Vivian Vaughn discovered the conflict and demanded rescission. The transaction involved trust property and directly pitted the trustee's personal interest against his fiduciary duty. The sale is voidable by Vivian as the affected beneficiary.
Vaughn Valentine, an officer of Vista Manufacturing, executed a deed conveying corporate land to an entity in which he held a personal interest without board approval. The conflict came to light after recording. Because the deed involved a fiduciary conflict, the transfer is voidable by the corporation upon showing the conflict alone.
Victoria Vernon, guardian of a minor's estate, transferred a rare painting from the estate to a company she controlled without court approval. Upon discovery the heirs demanded return. The transaction is voidable by the estate upon a mere showing of the fiduciary conflict.
Vance Vogel, serving as personal representative of an estate, sold estate farmland to a corporation in which he held a substantial ownership interest. Heirs discovered the conflict after the sale closed. The transaction is voidable by any interested person who did not consent after full disclosure.
Velocity Logistics' managing partner sold used trucks to a firm in which the partner held a substantial interest after concealing the conflict. The partnership discovered the self-dealing post-closing. The transaction is voidable by the partnership upon a mere showing of the fiduciary conflict.
A showing of the conflict of interest alone suffices. No further proof of unfairness or harm is needed under the traditional formulation.
Supporting sources
Many jurisdictions relaxed the rule by upholding conflicted transactions when approved by disinterested directors and proven fair to the corporation.
Supporting sources
The label originated in corporate fiduciary cases but the underlying concept of automatic voidability upon conflict appears in parallel rules governing trustees, personal representatives, and other fiduciaries.
Supporting sources
…agree that a discovered failure of the Board to reach an informed business judgment in approving the merger constitutes a voidable, rather than a void, act. Hence, the merger can be sustained, notwithstanding the infirmity of the Board's action, if its approval by majority vote of the shareholders is found to have been…