Business owners may have heard the term fiduciary duty, but may not know how it applies to their business. A fiduciary duty exists when one party has an obligation to act in the best interests of another party.
In a business context, a breach of fiduciary duty may occur where a business partner has a duty to other business partners or where a board of directors has a duty to represent the interests of the business’s shareholders, for example. If that party does not fulfill that duty, it is called a breach of fiduciary duty.
Elements of a claim
A breach of fiduciary duty may lead to a cause of action in civil court. In order for the duty to be legally enforceable, the relationship between the parties must have been created by law or by the circumstances of the relationship.
There are three elements that must be demonstrated to prove a breach of fiduciary duty.
The defendant must have had a duty to the plaintiff like the duty of good faith and fair dealing, the duty of full disclosure or the duty of loyalty.
The defendant must have breached his or her duty. This may include misusing their position, neglecting their responsibilities, misrepresenting or failing to disclose information or misappropriating funds, for example.
The plaintiff must have also suffered damages caused by the breach of fiduciary duty. The plaintiff may recover actual damages as well as punitive damages. Punitive damages may be awarded if there is evidence that the breach was caused by malice or fraud.
Damage amounts are dependent on the individual circumstances of the situation. An attorney can provide advice and representation for business disputes and related matters.
