Fiduciary Duties: A Practical Guide
Fiduciary duties are obligations that one party owes to another when they are in a relationship of trust and confidence. These duties are important because they ensure that the fiduciary acts in the best interests of the beneficiary and does not abuse their position of power or influence. To promote fairness, honesty, and accountability in various contexts, such as business, law, finance, medicine, and education, a beneficiary may bring a lawsuit against a fiduciary if a breach of fiduciary duties has occurred.
Duties of a Fiduciary to the Beneficiary
A fiduciary has several duties to the beneficiary, such as:
- Acting solely in the beneficiary’s interests and avoiding any conflicts of interest or self-dealing.
- Performing with reasonable skill, diligence, and prudence, and exercising independent judgment.
- Keeping the beneficiary’s information confidential, and not disclosing it to third parties without consent or legal obligation.
- Informing the beneficiary of all material facts and circumstances that may affect their relationship or interests.
- Acting honestly, fairly, and in good faith, and not engaging in fraud, deception, or misrepresentation.
Sources of fiduciary duties
Fiduciary duties may arise from different sources, such as:
- Contracts: Fiduciary duties may be expressly or impliedly created by a contract between the parties, such as a partnership agreement, a trust deed, or a power of attorney.
- Statutes: Some statutes regulate certain professions or activities and impose fiduciary duties on them, such as the Securities Act, the Companies Act, or the Health Practitioners Competence Assurance Act
- Common law: Common law principles recognize fiduciary duties in certain relationships or situations, such as directors and shareholders, lawyers and clients, or trustees and beneficiaries.
- Ethical codes: Fiduciary duties may be derived from ethical codes that govern the conduct of certain professions or organizations, such as the Rules of Professional Conduct for Florida attorneys.
Examples of fiduciary relationships
Fiduciary duties can arise in many relationships, including a parent owing fiduciary duties to their child. The following are industries that involve commonly litigated fiduciary relationships:
- Law: Lawyers owe fiduciary duties to their clients, such as confidentiality, loyalty, and disclosure. They must act in their clients’ best interests and avoid any conflicts of interest.
- Finance: A financial adviser’s fiduciary duty to a client means that the adviser must exercise care and diligence, disclose any conflicts of interest or fees, and act in good faith and fairness. The adviser must tailor their advice and recommendations to suit the client’s goals and circumstances.
- Medicine: Patients have the right to expect fiduciary duties from their doctors, such as loyalty, care, and confidentiality. Doctors must honor their patients’ privacy and autonomy, and provide ethical and competent care.
- Education: Teachers owe fiduciary duties to their students, such as care, disclosure, and good faith. They must foster a safe and supportive learning environment and provide accurate and relevant information.
When the fiduciary fails to comply with their obligations or acts contrary to the interests of the beneficiary, a breach has occurred. These duties may result in various consequences and remedies, such as:
- Damages: The beneficiary may claim compensation for any loss or harm caused by the breach.
- Injunctions: To halt or avoid the fiduciary’s violation of their duty, the beneficiary can request an injunction from the court. An injunction is a court-order to cease certain actions that may be obtained at the start of litigation to prevent further harm.
- Rescission: The beneficiary may seek to cancel or undo a contract or transaction that was tainted by the fiduciary’s breach.
- Disgorgement: If the breach permitted or caused the fiduciary to obtain profits or benefits it was not entitled, the beneficiary may seek recovery of these improperly gained funds.
This guide is provided as a resource and is not intended to provide legal advice. Each case is different and should be properly evaluated by an attorney familiar with this area of law.
If you need legal assistance with fiduciary matters in Florida, contact The Orlando Litigation Lawyer today. We can help you with litigation and mediation services to resolve any disputes or issues.