What is a fiduciary duty?
A fiduciary relationship arises when a person assumes a position of trust where one person has discretionary power over the interest of another. A fiduciary is expected to act with trust and confidence and to act with scrupulous good faith and candor towards a dependent party to whom the fiduciary owes his or her duty.
A concept of a fiduciary duty was originally a flexible equitable concept that arose to provide relief when no legal remedy was available. The core duty of a fiduciary is the duty of loyalty. This requires the fiduciary to put the interests of the beneficiary first and not to manipulate the relationship for the fiduciary’s personal benefit. This prevents the fiduciary from self-dealing, creating conflicts of interest, and withholding disclosure of material facts.
One of the more famous quotes that describes the extent of a fiduciary duty comes from the late U.S. Supreme Court Benjamin Cardozo, who was then serving as a judge on the New York Court of Appeals. Judge Cardozo described a fiduciary duty as “Not honesty alone, but the punctilio of an honor the most sensitive, is then the standard of behavior.”
A fiduciary owes a duty of care to execute his or her duties in an informed manner and to act as an ordinary prudent person. If the fiduciary has special skills, he or she is under a duty to use those skills.
A fiduciary duty may be created by contract when the parties agree to a fiduciary relationship. This includes the attorney-client or agent-principal relationship. Florida statutes also expressly impose a fiduciary in several contexts including: broker-client, trustee-beneficiary, guardian-ward, director-corporation, among others.
In sum, a fiduciary duty is often created based upon the nature of the parties’ relationship and may create a cause of action for breach when the fiduciary does not strictly adhere to acting in the best interest of the dependent party.
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