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date: 24 September 2020

Abstract and Keywords

This chapter discusses the nature and operation of mandatory and default rules in fiduciary law, arguing that loyalty is a core element of every fiduciary legal institution. Loyalty is the hallmark of fiduciary law, as it requires persons in other-regarding positions of power to perform functions selflessly, rather than selfishly. However, there are many circumstances in which a person undertakes and exercises other-regarding powers, underscoring the fact that a broad range of persons may be the subject of fiduciary law. This chapter first provides an overview of key concepts and context, focusing on the distinction between mandatory rules and default rules as well as sources of such rules in fiduciary law. It then considers fiduciary loyalty, citing examples that illustrate how a baseline of fiduciary accountability is implied by the essential nature of fiduciary legal institutions, along with the mandatory or default quality of the duties of care and good faith. The main thesis of this chapter is that loyalty is a basic constituent element of all fiduciary legal institutions. Whether fiduciary principles are mandatory involves a consideration and determination of whether the relationship or institution is inherently fiduciary as matter of law and legal classification. It also highlights the modern trend toward codification and clear legislative demarcation of mandatory and default rules in fiduciary law.

Keywords: mandatory rules, default rules, fiduciary law, fiduciary loyalty, fiduciary accountability, duty of care, duty of good faith, codification

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