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http://ssrn.com/abstract=2182192
 
 

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Fiduciary Duties and Exculpatory Clauses: Clash of the Titans or Cozy Bedfellows?


Louise L. Hill


Widener University School of Law

November 28, 2012

University of Michigan Journal of Law Reform, Vol. 45, No. 4, 2012
Widener Law School Legal Studies Research Paper No. 12-39

Abstract:     
Centuries ago, when land represented the majority of wealth, the trust was used primarily for holding and transferring real property. As the dominant form of wealth moved away from family land, the trust evolved into a device for managing financial assets. With this transformation came the use of exculpatory clauses by both amateur and professional trustees, providing an avenue for these fiduciaries to escape liability for designated acts. With the use of exculpatory provisions, discussion abounded about whether fiduciary duties were mandatory or subject to modification. The latter view eventually prevailed, with the majority of jurisdictions viewing fiduciary duties as default rules; that is, part of a private agreement around which the parties are free to contract. Contracting around fiduciary duties is of particular concern when a lawyer suggests himself for a fiduciary role and inserts an exculpatory clause into the governing instrument. Although the lawyer is subject to applicable legal ethics rules, such as those which govern communications and conflicts of interest, this contractarian view of the attorney-client relationship is less than ideal, especially when lawyers and non-lawyer professionals are involved in a reciprocal referral agreement. During the recent revisions to the UPC, mandates relating to the default nature of fiduciary duties were not addressed. Perhaps this was because the matter was outside the scope of the revisionists’ review, or perhaps the drafters of the revisions were comfortable with the recent position the Uniform Trust Code and the Restatement of Trusts have taken on exculpatory clauses. However, the UPC revisions should have addressed this matter with specificity. Given public policy concerns, client protection, fiduciary responsibilities, and the professional responsibility of lawyers, it may be that the standard of prudence should not be abandoned so easily.

Number of Pages in PDF File: 27

Keywords: trusts, fiduciary duties, exculpatory clauses

JEL Classification: K11, K19

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Date posted: November 29, 2012  

Suggested Citation

Hill, Louise L., Fiduciary Duties and Exculpatory Clauses: Clash of the Titans or Cozy Bedfellows? (November 28, 2012). University of Michigan Journal of Law Reform, Vol. 45, No. 4, 2012; Widener Law School Legal Studies Research Paper No. 12-39. Available at SSRN: http://ssrn.com/abstract=2182192

Contact Information

Louise Lark Hill (Contact Author)
Widener University School of Law ( email )
PO Box 7474
Wilmington, DE 19803
United States
302-477-2000 (Phone)
302-477-3890 (Fax)
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