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Article
Fiduciary Discretion
Faculty Scholarship
  • D. Gordon Smith
  • Jordan C. Lee
Publication Date
6-5-2014
Keywords
  • Fiduciary Law,
  • Duty of Loyalty,
  • Contracts,
  • Business Organizations,
  • Employment
Document Type
Article
Abstract
Discretion is an important feature of all contractual relationships. In this Article, we rely on incomplete contract theory to motivate our study of discretion, with particular attention to fiduciary relationships. We make two contributions to the substantial literature on fiduciary law. First, we describe the role of fiduciary law as “boundary enforcement,” and we urge courts to honor the appropriate exercise of discretion by fiduciaries, even when the beneficiary or the judge might perceive a preferable action after the fact. Second, we answer the question, how should a court define the boundaries of fiduciary discretion? We observe that courts often define these boundaries by reference to industry customs and social norms. We also defend this as the most sensible and coherent approach to boundary enforcement.
Citation Information
D. Gordon Smith and Jordan C. Lee. "Fiduciary Discretion" (2014) p. 609 - 644
Available at: http://works.bepress.com/gordon_smith/24/