Question 1

Who owes a fiduciary duty?

Accepted Answer

Attorneys to clients, corporate directors to shareholders, trustees to beneficiaries, and partners to each other in most partnerships. Real estate agents owe fiduciary duties to their clients in most states. Independent contractors and regular vendors generally don't.

Question 2

What's the difference between fiduciary duty and good faith?

Accepted Answer

Good faith means acting honestly and fairly — it's the baseline for all contracts. Fiduciary duty goes further: you must put the other person's interests first, disclose conflicts, avoid self-dealing, and exercise the highest level of care. Not every contract creates a fiduciary relationship.

Question 3

What happens if someone breaches their fiduciary duty?

Accepted Answer

Courts can order them to return any profits gained from the breach, pay damages, and in some cases remove them from their position. Fiduciary breach claims often carry more weight than regular breach of contract — courts treat them as a betrayal of trust.

Question 4

Can a contract create a fiduciary duty?

Accepted Answer

Yes, but the language needs to be specific. Simply calling someone an 'advisor' or 'consultant' doesn't automatically create fiduciary obligations. If you want fiduciary-level protection, the contract should explicitly state that the party accepts fiduciary responsibilities.

Question 5

Can you waive a fiduciary duty in a contract?

Accepted Answer

In some contexts, partially. Delaware LLC agreements, for example, allow members to modify or eliminate certain fiduciary duties. But you generally can't waive the duty of good faith and fair dealing, and courts scrutinize these waivers closely.

Question 6

Does my financial advisor owe me a fiduciary duty?

Accepted Answer

It depends on their registration. Registered Investment Advisors (RIAs) owe fiduciary duties under federal law. Broker-dealers traditionally operated under a lower 'suitability' standard, though the SEC's Regulation Best Interest has raised the bar. Always ask and get it in writing.

Fiduciary Duty

Definition

In Practice

Common in these contract types

Related terms

Frequently asked questions about fiduciary duty

Create a contract with proper fiduciary duty clauses