Fiduciaries appear in many laws, such as contract, tort, corporate law, agency, partnership, criminal law, employment law, property law. But rarely are the policies of the fiduciary law examined as such, and rarely are fiduciaries examined together in a systematic manner. This book offers a study of the fiduciary family members and the different rules that govern them.
Even though fiduciary relationships are embedded in many legal categories, somehow they do not find a comfortable home in any category. Further, as diverse as fiduciary law is in terms of the contexts in which it arises, it is quite cohesive in terms of the problems it addresses, the principles it presents, and the solutions it mandates. The seemingly disparate rules, applicable to different types of fiduciaries, are in fact consistent with one another, reflecting the costs of verifying the fiduciaries’ statements and monitoring the fiduciaries’ actions. In a changing environment, a view of the foundations of fiduciary law helps shape fiduciary rules to new situations or relieve existing situations from legal restrictions. A study of fiduciary law assists students in predicting who the new members in the fiduciary family are likely to be, and which of the existing ones will die out.
The book offers students a short survey of fiduciary law in time (from Hammurabi's Code 3,000 years ago) and in space (Europe, UK, Japan, China, Taiwan) and the concept of trust. It contains questions and problems drawn from newspapers, novels and other story sources that, when analyzed, reveal fiduciary relationships.
The purpose of this book is to study fiduciary law by uncovering its underlying structure, principles, themes and objectives. Fiduciaries appear everywhere in the law. They emerge in contract, in tort, in corporate law, agency law, partnership law, criminal law, environmental law, employment law, and constitutional law, in property law, in procedure, and in other areas. But rarely are the policies of the fiduciary law examined as such, in its own context. This book examines fiduciary law’s reach and its limits separately from the other categories.
Chapter One highlights the roots of fiduciary law and the impact of culture, psychology, religion, and commerce on the changes that the law has undergone. Against the background of over 3,000 years, the colors of the present law emerge sharper and more vividly.
Chapter Two defines fiduciary relationships by outlining the elements that compose these relationships. Each element is examined by cases, discussion topics, and often by problems, and exposure of gray areas in which fiduciary relationships might arise. The dark side of fiduciary relationships and their potential abuse is exposed as well.
Chapter Three deals with fiduciary law duties and the rationales of the different degree of such duties in different situations.
Chapter Four covers the way in which fiduciary duties can be relaxed and changed by the consent of the parties to the fiduciaries (the entrustors). It shows that many fiduciary duties are default rules that can be waived by the entrustors, provided the entrustors are independent and received full disclosure of all relevant facts necessary to determine whether to waive their rights.
In Chapter Five, we review fiduciaries as arbitrators. Fiduciaries can be obligated to many parties. For example, corporate directors can be fiduciaries to hundreds or thousands of shareholders and to various classes of shareholders. These shareholders may have different and perhaps conflicting interests. Although sometimes fiduciaries are unable to serve the conflicting interests, in many situations they can, depending on the circumstances and guidelines.
Chapter Six focuses on the question: why fiduciary law should be recognized as a category. Besides, what is so important about categories? It turns out that the issue is not merely theoretical but also very practical. The previous Chapters demonstrate the unique nature of fiduciary law as a hybrid: it is part property and part contract; it rubs shoulders with tort and with criminal law. This body of law intersects with many other categories of law. The question is whether it should remain unique. There are loud voices that seek to place fiduciary law as a subcategory of contract law. This Chapter raises the issue, the arguments, and the implications of categorizing fiduciary law as contract.
Chapter Seven proceeds to discuss the courts’ discretion in fashioning fiduciary rules, the courts’ self-imposed limitation in exercising their discretion, and the remedies that can be meted out on breach of fiduciary duties.
In Chapter Eight, we travel abroad and peek at fiduciary law outside the United States. We compare United States laws with the laws of a select group of countries: Japan, China, Taiwan, the United Kingdom, and the European Union. The main purpose of the comparison is not to learn the rules in each of these systems but rather to recognize differences that must be explored by lawyers who deal with businesses and lawyers in other systems. The Chapter notes issues to which lawyers should be sensitive. These include not merely the legal rules but also the social, cultural, and economic pressures that may render law less prominent or necessary. These pressures can provide the substitutes for the law because they aim and achieve at the same purposes that fiduciary law aims to achieve in the United States.
Chapter Nine deals with the idea and practice of trust. Even though most human relationships are based on some degree of trust, fiduciary law aims at situations that require a high degree of trust. The Chapter explores the nature and reasons for the law’s interference in support of trusting relationships among the parties.
We close our study with an Epilogue: maintaining and restoring trust. This subject is not necessarily part of the specific rules that govern fiduciaries. However, lawyers serve clients (whether fiduciaries or not) who have lost the trust of their investors, or employees, or customers. These clients attempt to restore that trust or they might go out of business. In such cases, lawyers can no longer merely recount legal rules to their clients. Besides, many lawyers advise clients in far more than mere legal rules. The contexts, whether business context or personal or others, must be taken into consideration.
Tamar Frankel is a Michaels Faculty Research Scholar, Professor of Law at Boston University, where she has been teaching for over thirty years. She has been a visiting Professor at Harvard Law School and Harvard Business School and has lectured in Japan, Oxford, UK, Switzerland, Malaysia and India. She served as an attorney fellow at the Securities and Exchange Commission and was a Visiting Scholar at the Brookings Institution, Washington D.C.
She is the author of Trust and Honesty, America’s Business Culture at a Crossroad (Oxford University Press 2006), Trust and Honesty in the Ral World (Fathom Publishing Company 2007) (with Mark Fagan), Securitization (Ann Taylor Schwing ed.) (2d. ed.) (Fathom Publishing Company 2006), Fiduciary Law (Oxford University Press 2010), The Regulation of Money Managers (2d ed.) (Aspen Law and Business 2012) (with Ann Taylor Schwing) and The Ponzi Scheme Puzzle (Oxford University Press 2012).
Prof. Frankel holds a law degree from the Jerusalem Law Classes in Israel, and an LL.M. and S.J.D. degrees from Harvard Law School.
Legal Duties of Fiduciaries
by Tamar Frankel
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