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The Law of Fiduciary Duties, 2d Edition |
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| April 25, 2024 |
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| CHAPTER ONE: HOW DOES FIDUCIARY DUTY ARISE? > Section E: Vicarious Liability for Breach of Fiduciary Duty > 1:30 In General |
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| -- In General |
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Assume that Smith owes fiduciary duty towards Jones and breaches it. Depending on the circumstances, the rights and obligations of third parties towards Jones might be affected by Smith's breach. Such a result might come from one of two different sources: (a) the third party's liability towards Jones arising out of his relationship with Smith's conduct (discussed in Secs. 1:31 and 1:32 below); or (b) Smith's inability to put persons with whom he deals in any better position with regard to the res than he himself occupied (discussed in Sec. 5:17 below). The first type of case may properly be referred to under the general heading of "vicarious liability": the liability attaches to a person because of his relationship to the transaction and to the wrongdoer. The second type of case is treated in Section 5:17, under constructive trusts, for the "liability" in those cases attaches to the res rather than to the person, and the fact that the res may be followed through third-party hands is not so much a matter of vicarious liability as of property impressed with a trust. |
| | | In the following two Sections we consider the circumstances under which the court will find one person vicariously liable for another's breach of fiduciary duty. These fact patterns always involve at least three people: the plaintiff who has been harmed, the primary defendant who owed fiduciary duty towards the plaintiff, and the vicariously liable defendant who, while he may or may not have owed a direct duty towards the plaintiff, will still be treated (in the circumstances described) just as if he did. |
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