D. Gordon Smith, Contractually Adopted Fiduciary Duty, 2014 U. Iʟʟ. L. Rᴇᴠ. 1783.
Contract, Fiduciary Duty
The Delaware Supreme Court recently referred to “contractually adopted fiduciary duties.” Although some commentators, including Larry Ribstein, view fiduciary duties as a type of contract term, the notion of contractually adopted fiduciary duties is incoherent. The need to opt in to fiduciary duties would arise in only two circumstances: (1) fiduciary relationships that do not invoke fiduciary duties without contractual authorization, and (2) nonfiduciary relationships in which the parties wish to invoke fiduciary duties that would otherwise be absent. The first category of relationships does not exist, as courts impose fiduciary duties when the structure of a relationship indicates that fiduciary duties are justified, and the second category of cases is rare — and should be nonexistent — as independent contracting parties generally have no reason to opt in to the fiduciary regime because fiduciary duties simply do not make sense outside of fiduciary relationships. Nevertheless, the issue arises occasionally in judicial opinions, and this Essay offers a simple proposal to clarify the line between fiduciary duties and contractual duties. When a duty arises from the language of a contract, that duty is a contractual duty, but if a duty arises as a matter of common law because the structure of the relationship comports with the description of fiduciary relationships, that duty is a fiduciary duty.
For “Larry Ribstein Memorial Symposium,” sponsored by the University of Illinois College of Law, October 17-18, 2013.
University of Illinois Law Review