Also known as: loyalty duty · duties of loyalty · duty of loyalty · fiduciary loyalty
Written by attorneys · grounded in primary & secondary sources — see below
A fiduciary obligation requiring a person in a position of trust to prioritize the interests of the beneficiary or entity over personal gain. The obligation encompasses duties to account for benefits derived from the relationship, to refrain from self-dealing, and to avoid competing with the beneficiary.
Lance Lee serves as a member of Lone Peak Energy, a member-managed limited liability company. He learns of a profitable contract during company business and signs it personally through a separate entity. The duty of loyalty requires Lance to account to the company for any profit obtained from that opportunity.
Lola Langley and Leonard Lowe form a limited partnership. Their agreement states that no partner owes a duty of loyalty. The statute prohibits any attempt to eliminate the duty of loyalty, so the clause has no effect and the partners remain bound by the obligation.
Select any source to read its text and confirm it supports the definition.
Luis Lopez and Lamar Lewis operate a general partnership. Their written agreement purports to remove the duty of loyalty for all partners. The statute forbids alteration or elimination of the duty of loyalty, rendering the provision unenforceable.
A criminal defendant tells defense counsel of an intent to commit perjury at trial. Counsel refuses to present the false testimony and warns of disclosure to the court. The duty of loyalty does not extend to assisting perjury, so counsel may take reasonable remedial steps without violating the obligation.
Leo Lynch, a member of a member-managed limited liability company, receives a secret commission from a supplier during company operations. The duty of loyalty requires Leo to account to the company and hold the commission as trustee for any profit derived from the transaction.
Lumen Capital is a limited partnership. Its general partner awards a contract to a company the partner owns without disclosure. The duty of loyalty requires the general partner to account to the limited partnership for any benefit obtained from the self-dealing transaction.
No. The uniform acts expressly prohibit any provision that alters or eliminates the duty of loyalty. Partners may ratify a specific transaction after full disclosure, but they cannot remove the duty itself.
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Yes. A member or partner must account to the entity and hold as trustee any profit derived from a company opportunity or from the use of company property. This obligation prevents personal enrichment at the entity's expense.
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Yes, but it does not extend to assisting perjury. Counsel must first attempt to dissuade the client and may disclose the perjury to the court as a reasonable remedial measure when necessary.
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Every member owes the duty of loyalty to the company and, subject to dissociation rules, to the other members. The obligation arises directly from membership status in a member-managed entity.
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