The Fiduciary Obligation as the Adoption of Ends

Abstract

Contractualist scholars advance a theory of fiduciary duties as implied contract. Fiduciary duties are viewed as terms to which the parties would have agreed if they had the time and inclination to bargain. Contractualists maintain that when costs of bargaining specification and monitoring are high, courts imply particular terms and call them fiduciary duties, but actual terms trump implied terms. While it is true that many fiduciary duties can be waived or modified, this Article claims that the contractual approach is incomplete. The contractual approach can neither predict when fiduciary duties arise nor account for the mandatory rules that characterize fiduciary law, dismissing them, instead, as trivial. After critiquing the contractual model, this Article proposes a positive account of fiduciary duties based on Kant's description of duties of ethics and imperfect duties. Imperfect duties do not entail specific conduct that can be externally enforced; they require instead that the agent adopt goals, objectives, or ends. The fiduciary duty can best be described as an obligation by the fiduciary to adopt the principal's objectives. The Article demonstrates that leading fiduciary cases, as well as questions regarding when certain fiduciary duties arise, can best be understood within the framework of the fiduciary obligation as a duty to adopt the principal's ends as opposed to the framework of contract.

Keywords: fiduciary, duty, contract, ethics, Kant

JEL Classification: K12, K20, K22