Also known as: prudent-man · prudent person · prudent investor rule
Written by attorneys · grounded in primary & secondary sources — see below
A hypothetical standard of conduct or belief measured by what a reasonable, careful person would do or believe under the circumstances.
An officer receives a detailed report from a known informant describing a suspect selling drugs from a specific location at a particular time. The officer confirms the suspect's presence and observes a hand-to-hand exchange matching the description. The officer arrests the suspect. The facts known to the officer at that moment meet the standard because they would lead a reasonable person to conclude the suspect committed the offense.
A trustee receives a charitable trust directing support for community health programs and specific guidance naming evidence-based initiatives. For four years the trustee leaves all assets in savings accounts earning under one percent and makes no distributions or research. The trustee's inaction fails the standard because a reasonable person would have evaluated the guidance, formulated an investment plan, and pursued distributions to advance the trust purposes.
Select any source to read its text and confirm it supports the definition.
A bank administering a common trust fund publishes notice of an accounting in a newspaper of general circulation. Many beneficiaries have known names and addresses on file with the bank. Publication alone does not satisfy the standard because a reasonable person of business counting costs would recognize that individual notice by mail is feasible and necessary to inform those whose property interests are affected.
Trustees holding funds for a college and a hospital invest in stocks of established companies after considering safety and income relative to the institutions' needs. The stocks later decline in value. The trustees meet the standard because a reasonable person managing his own affairs would have selected those investments under the circumstances existing at the time of purchase.
The standard is objective. It asks what a reasonable person would have done or believed, not what the particular actor subjectively thought was reasonable. Courts apply the same hypothetical person across probable cause, trustee duties, and negligence analyses.
Supporting sources
No. The baseline is the conduct of an ordinary prudent person. A trustee with special skills must use those skills, but the core measure remains what a reasonable person would do given the trust's purposes and circumstances.
Supporting sources
No. The standard requires affirmative consideration of trust purposes, terms, and circumstances plus exercise of reasonable care. Prolonged inaction with assets in low-yield accounts without investigation or distribution decisions violates the duty.
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Yes. Both ask whether the actor's conduct or belief matches what a reasonable person would have done or concluded under the known facts. The contexts differ, but the hypothetical measure of reasonableness remains constant.
Supporting sources
…in determining the reasonableness of the impersonal broadcast notification here used, to ask whether it would satisfy a prudent man of business, counting his pennies but finding it in his interest to convey information to many persons whose names and addresses are in his files. We are not satisfied that it would.…