Seven Points to Explain Why the Law Ought Not Allow the Elimination of Fiduciary Duty Within Closely Held Businesses - Cardozo is Dead: We Have Killed Him
11 Pages Posted: 30 Nov 2006
Prepared as part of the author's work as co-reporter for the Revised Uniform Limited Liability Company Act, this essay argues against legislation that empowers private agreements to eliminate fiduciary duty within a business organization. The essay considers: (i) the venerable role of fiduciary duty within business organizations and the limited predictive powers of those urging radical reform; (ii) the absence of prescience in contract drafters; (iii) the strict construction function of fiduciary law; (iv) the inevitable and inappropriate pressure that elimination would put on the obligation of good faith and fair dealing; (v) the differences in remedy available for fiduciary claims as distinguished from contract claims; (vi) the difference between drafting law for Delaware and drafting a uniform act; and (vii) reasons that public corporation law is different from LLC law and why Delaware law should not dominate the latter context.
Keywords: fiduciary, duty, Delaware, Cardozo, 'freedom of contract', eliminate, limit, restrict, limited liability company, LLC, Re-ULLCA, NCCUSL, uniform law, business, organization, entity
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