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Fiduciary Duties in a Commercial Context

Tuesday, 2 April 2013

A fiduciary relationship is a special kind of relationship between two or more parties based upon trust and confidence. The law requires that a fiduciary acts for another person in good faith in exchange for the trust and confidence that person has placed in the fiduciary.

Generally, a fiduciary can be any person who is authorised to act on behalf of another person in a particular matter such as the directors of a company, a partner acting on behalf of other partners in a firm, a solicitor acting on behalf of a client, a trustee acting for a beneficiary or an agent acting for a principal.

Performance of Fiduciary Duties

Since the relationship is that of trust, the law requires the fiduciary to perform their duties in a reasonable and bona fide manner, while observing strict standards of integrity and honesty. Directors’ fiduciary duties are defined in the Companies Act 2006 but general fiduciary duties are defined under the common law to mean that a fiduciary must:

  • Avoid circumstances that create conflicting fiduciary duties.
  • Not intentionally put themselves in a position where their duties come into direct conflict with their own vested interests.
  • Refrain from generating profits for themselves using their position as a fiduciary

In cases of conflict, the fiduciary must act in the best interest of the party to whom they owe the fiduciary duty. The non-profit rule is particularly pertinent to commercial agent-principal relationships where the fiduciary must obtain informed consent of the principal before profiting from their position.

Remedies for Breach of Fiduciary Duties

Although remedies for breach of fiduciary duty will vary depending upon the facts of each case, the most commonly sought remedies against a fiduciary are: injunctions, restitution for loss, termination of agreements wrongly entered into by the fiduciary and accounting for profits.

In some circumstances, courts also have discretion to provide equitable relief and award damages for any loss suffered as a result of the acts of the fiduciary. It is important to note that the scope of the relationship is governed by the contract, and courts will consider the contractual terms when awarding any damages.


Transacting parties should clearly set out the extent of the powers and duties of a fiduciary in the terms of their contract. Reliance purely on the common law interpretation of fiduciary duties should be avoided. Contracts should be drafted carefully to include the limitations of the fiduciary duties and stipulate reliefs for in cases of wrongful behaviour.

It is important to understand both your rights and responsibilities when entering commercial relationships, particularly where fiduciary duties exist. For more information please contact us on 0207 611 4848.

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