Arthur R. Lehman, L.L.C.

Business tort basics: what is fiduciary duty?

As frequent readers of our blog know, there are extensive laws that govern just about everything in the business world. From employees to contracts to business transactions, every decision a company makes must first be scrutinized by those familiar with business law to make sure that a decision does not violate any state or federal laws.

If a violation occurs, a company may face litigation depending on what violation took place. In the event of a civil wrongdoing, a company might find themselves considering the laws governing business torts. One such business tort that companies across the United States and here in New York must constantly consider is fiduciary duty.

But what is fiduciary duty, you may ask? While few can explain exactly what it is, most people can recognize when a breach has occurred. This often isn't enough though if you want to seek compensation from the violator, which is why we wanted to discuss what a fiduciary relationship is and the duties a fiduciary must adhere to.

In the realm of business law, a fiduciary relationship is considered to have been formed if one party agrees to act in the benefit of another party. An example of a fiduciary agreement is a person buying shares in a company. The expectation of the shareholder is that the shares will grow in value over time and that the company will not misappropriate their funds in a way that could jeopardize the investment.

If a misappropriation occurs that has an adverse effect on the beneficiary's interest then a breach of fiduciary duty is said to have occurred.  Recognizing when this has occurred and being able to link it back to the specific terms of an agreement is important in civil litigation. It may require the skill of a lawyer as they may be more proficient in the law and will have a better idea of how to seek damages that the civil wrongdoing may have caused.

Source: WiseGeek, "What Are Business Torts?" Accessed Oct. 31, 2014

No Comments

Leave a comment
Comment Information