Fiduciary Duty: Are You Held to a Higher Standard?
In certain relationships, one party is held to a higher standard of conduct. In most circumstances one person owes a duty to another to act reasonably and not negligently. But some relationships give rise to a special duty, such that one owes the duty to another to not only act reasonably, but to act with scrupulous care, honesty, and diligence. This is called a “fiduciary duty.”
These special relationships are typically confidential involving great intimacy, disclosure of secrets, or entrusting of power. A fiduciary relationship has been described as something approximating business agency, professional relationship, or family tie impelling or inducing the trusting party to relax the care and vigilance he would ordinarily exercise. There exists peculiar reliance in the trustworthiness of the other party. That other party, therefore, is held to a higher standard of conduct because of the nature of the relationship and the position of trust and confidence and superiority of position over the trusting party.
Many relationships give rise to a fiduciary duty as a matter of law. Those relationships include:
- Real Estate Agent/Principal
- Business Partners
- Corporate Directors and Officers (to each other and the corporation)
- Escrow Agents
- De facto Conservators
But any relationship can give rise to a fiduciary duty if the facts support imposing one. A fiduciary relationship exists whenever trust and confidence is reposed by one person in the integrity and fidelity of another. Whether a fiduciary relationship exists may turn on many factors, including the health, age, and relative sophistication of the parties; the length and nature of the relationship between the parties; the subject of the parties’ dealings with one another; and the degree of influence by one party over the other. Thus, while the relationship between a bank and its customers is ordinarily only a debtor/creditor relationship and not fiduciary in nature, courts have imposed a fiduciary duty when the facts proved that the bank acted as the customer’s financial advisor for many years, and the customer relied upon the bank’s financial advice.
Thus, one may be held to a fiduciary duty standard of care in any context besides those listed, such as when one undertakes to be a caretaker for a family member. In any relationship where one party places peculiar reliance in the trustworthiness of another, the party in the position of trust is held to a fiduciary duty standard of conduct and must act with utmost care, honesty, and diligence.