Abstract:
This essay criticizes the conventional view that loyalty lies at the heart of fiduciary law. What matters in fiduciary relationships, I argue, is that fiduciaries fulfill their mandates (eg, executing trusts, promoting the principal’s business, providing legal services): whether that task is performed loyally is not, and should not be, the law’s concern. Indeed, in most fiduciary relationships the issue of loyalty cannot even arise because it is typically not possible for fiduciaries to act loyally — or disloyally — even if they were inclined to do so. I further argue that the unimportance of loyalty in fiduciary relationships has four implications for the broader understanding of fiduciary law: (1) the no-conflict rule is a prophylactic duty; (2) the no-profit rule is part of the no-conflict rule; (3) disgorgement of profits is a remedy for breach of the no-conflict duty; and (4) fiduciary law is in most cases part of contract law, broadly understood.
Smith, Stephen A, The Deed Not the Motive: Fiduciary Law Without Loyalty (March 21, 2016). P Miller and A Gold, eds, Contract, Status, and Fiduciary Law, Oxford, OUP, 2016, forthcoming.
First posted 2016-03-23 07:01:17
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