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A fiduciary is a person that owes a duty to another to act in good faith and with due regard for the interests of the other person. Because that term is so broad and could cover so many different types of relationships, courts have held that it would be impossible to provide a definition comprehensive enough to cover all cases.
Formal fiduciary relationships include business partners, agent and principal, corporate officers and the corporation, persons holding power of attorney, joint ventures, trustees and beneficiaries, and executors and beneficiaries. Additionally, informal fiduciary duties can exist in special situations outside of those formal relationships.
Generally speaking, being a fiduciary means the person has a duty to act or advise primarily for the benefit of another in matters connected with that relationship. Any time that a fiduciary breaches a duty owed, such as putting his own interests first, he has committed a wrong for which damages could potentially be awarded. In addition to reward for the economic loss caused by the fiduciary breaching his duties, a person can also recover for mental anguish caused by the fiduciary that are a foreseeable result of the breach.
- Financial loss
- Exemplary (or punitive) damages
- Mental anguish
An informal fiduciary relationship can potentially be based on any relationship that arises from a moral, social, domestic or purely personal relationship of trust and confidence. Typically, an informal fiduciary relationship will be found where there is dominance on one side, and dependence on the other that lasted over such a long period of time that it would objectively justify reliance on the part of one of the parties.
Generally, all fiduciaries owes the following duties: (1) duty of loyalty and utmost good faith; (2) duty to refrain from self-dealing; (3) duty of candor; (4) duty of full disclosure; and (5) duty to act with the strictest integrity. Depending on the fiduciary, additional duties may be owed.
In addition to the general duties, business partners owe one another a duty of loyalty to the business, duty to refrain from competition with the business, and duty not to usurp opportunities for the business for themselves.