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Breach of Fiduciary Duty: Everything You Need to Know

Trust is essential in all kinds of relationships. It is mandatory in fiduciary relationships, such as between a doctor and a patient or a lawyer and client. Their professions bind them to an ethical duty to always have the best interests of their clients in mind. A fiduciary relationship is also applicable to relationships between spouses or parents and children.

But what if this trust is broken and there was a breach in the partnership? What is a breach of fiduciary duty defined by law, and how do you determine if a situation is eligible for claims?

Fiduciary definition

Britannica defines a fiduciary as someone who has powers over a person’s property or acts on behalf of a person and is legally required to function in the best interest of the person represented.

According to Black’s Law dictionary (a widely used U.S. law dictionary), the fiduciary duty is the obligation to care for the client to the best of their capacity, always do things in good faith, and be loyal and honest.

A perfect example of fiduciary duty would be the obligation of an attorney to a client. An attorney is bound by law and duty to treat clients with fairness and fidelity. The attorney should maintain utmost confidentiality on their client’s background and give their 100% effort when represented in court.

What determines a breach of fiduciary duty?

A breach of fiduciary duty means that the person entrusted with something of value has acted in a way that is self-benefiting. This act usually results in loss or damages for the client. To determine a breach of fiduciary duty, there are certain elements to consider.

First, it needs to be established that there was indeed a fiduciary relationship. Next, there needs to be evidence of the breach of fiduciary duty and that the client acquired loss and damages due to the result of the breach.

A breach can be done subtly and maliciously or sometimes even taking money through extortion. It can also be in the form of bad investments, neglect of duty, or conflicts of interests. That is why in any transaction, employment or investment, it is very important to keep copies of all contracts, transaction records, receipts, and even communications in case a breach occurs.

Common examples of breach of fiduciary claims

Some of the most common types of breach of fiduciary duties are between employers and employees or agents and principals. The breach can be company violations such as sharing confidential company information, mishandling funds, selling out to competitors, and using the employer or company name as a means for personal profit.

Company partnerships are also one of the most types of relationships where breaches arise. This can be due to mismanaging assets, failure to disclose important transactions or conflicts of interests, malicious behavior that causes damage to the company’s reputation and exposing trade secrets.

The relationship between the board of directors also requires trust that each member will act in the company’s best interest at all times. But every now then, a breach occurs that forces shareholders to file a lawsuit for the company’s protection. Examples of a breach in this situation include refusal to pay dividends, preventing the exercise of voting rights, and refusal to show company records to shareholders.

How do you make a breach of fiduciary duty claim?

Suppose you have acquired losses and damages caused by a supposed professional you trusted, and a written agreement established this relationship. In that case, you may be eligible to sue for breach of fiduciary duty.

This claim, however, is not a simple process. There is a need to establish solid evidence of the breach and directly connect it to the acquired losses. The defendants can always find slips in the policies of the contract you signed together and refute your claims.

Weaknesses in contracts are why people hire skillful attorneys experts in breach of fiduciary duty claims litigations because they know their way around these contracts. But sometimes, just having a signed agreement is not enough to obligate someone to fiduciary duty. The complexities of contracts are where things get technical, and it’s best to consult with attorneys who are experts in this field.

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