In simple terms, a fiduciary duty is when a person owes a client special treatment. This applies to professionals like attorneys; because an attorney is acting as an agent of the person they are representing, they must protect the best interests of the client and notify them of any risks or changes in circumstances. This is a higher legal standard than is required of non-professionals in the same situation.
In the context of a breach of contract, business partners have a fiduciary duty towards each other to have their best interests at heart. If you are dealing with a case involving a contractual breach, it is best to work with a lawyer who understands fiduciary duty in Georgia contracts. The knowledgeable attorneys at Sparks Law could explain your legal rights and obligations and help reach a positive resolution in your case.
In old partnership laws, a person has a fiduciary duty to any business partner they have. For instance, say a person drives five friends to a wedding, and one of the friends pays for gas money and collects $5 from the other people to pay the driver. Technically, the passengers are customers, and the driver is in a general partnership with the friend who is supplying the gas money.
By the book, the business partners would have a fiduciary duty towards one another for all their business dealings. It could even be considered a breach of fiduciary duty for one of them to take a deal with someone else without running it by their business partner first. Fiduciary duty means that a person cannot do side-deals without consulting their business partner and giving them the option to take advantage of the deal.
If one business partner takes an action, it is possible that the whole partnership could be liable. In the prior example, say the friend decides to give fake money to the gas station. The driver could also be held liable for the fraud through their partnership.
A partnership is a huge deal unless the parties have a contract that specifies that they do not have a fiduciary duty to each other. As such, it is essential for potential business partners to consult a Georgia attorney about an agreement that addresses fiduciary duty.
There are three basic components of fiduciary duty, including a duty of care, a duty of loyalty, and a duty of good faith.
Duty of care basically means that a person must take care of their business partner like they would a close family member. This entails acting in their best interests and not hiding anything from them, even if that means some self-sacrifice.
Not disclosing or warning a business partner or client about something that could harm them could constitute a breach of the duty of care. Similarly, doing something that is in one’s best interests but not in the business partner’s best interests could also be considered a breach.
An easy example of the duty of loyalty is the fact that a person must run every potential deal by their business partner. Nowadays, this duty is usually interpreted to only mean business deals that are in that industry. If a person has a lawncare company with somebody and also gets an opportunity to buy and flip a piece of real estate, they generally do not have to tell their lawncare business partner because it is in a different industry.
Duty of good faith is the duty to be completely honest and have the other party’s best intentions at heart. Examples of bad faith include:
An experienced lawyer at our Georgia office could further explain these elements of fiduciary duty to prospective business partners and help ensure that all parties understand their obligations.
Fiduciary duty can be a difficult concept for anyone without a legal background to understand. If you have questions about fiduciary duty in Georgia contracts, reach out to the seasoned attorneys at Sparks Law. Our team is here to walk you through the legal complexities and help ensure your business success. Give us a call today for a consultation.