Fiduciary Discretion

36 Pages Posted: 24 Mar 2013 Last revised: 10 Jun 2015

See all articles by D. Gordon Smith

D. Gordon Smith

Brigham Young University - J. Reuben Clark Law School

Jordan Lee

affiliation not provided to SSRN

Date Written: June 5, 2014


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.

Keywords: Fiduciary Law, Duty of Loyalty, Contracts, Business Organizations, Employment

JEL Classification: K12, K22, M13

Suggested Citation

Smith, D. Gordon and Lee, Jordan, Fiduciary Discretion (June 5, 2014). 75 Ohio State Law Journal 609 (2014), Available at SSRN: or

D. Gordon Smith (Contact Author)

Brigham Young University - J. Reuben Clark Law School ( email )

422 JRCB
Provo, UT 84602
United States
801.422.3233 (Phone)
801.422.0390 (Fax)

Jordan Lee

affiliation not provided to SSRN

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