Also known as: relationships of trust and confidence · fiduciary relationship · confidential relationship
Written by attorneys · grounded in primary & secondary sources — see below
A relationship in which one party reposes trust in another and reasonably expects the other to act with loyalty or candor. The relationship triggers heightened duties of disclosure, loyalty, or care and may shift burdens of proof or invalidate exculpatory terms or donative transfers procured through overreaching.
Select any source to read its text and confirm it supports the definition.
Ronald Reed, as settlor, signs a trust instrument prepared by trustee Ralph Richardson that contains a broad exculpatory clause. Richardson drafted the clause without explaining its effect and without independent advice for Reed. A court refuses to enforce the clause because Richardson abused the relationship of trust and confidence that existed between trustee and settlor.
Roland Rhodes forms Regal Apparel and sells his own warehouse to the new corporation at an inflated price. Rhodes discloses the profit only to one early subscriber and conceals it from later investors contemplated in the original financing plan. The corporation recovers the secret profit because Rhodes stood in a relationship of trust and confidence with all initial investors.
Raphael Rivera and Rosa Ruiz form a joint venture to operate a hotel. When the original lease expires, Rivera secretly obtains a renewal in his own name. Because the parties stood in a relationship of trust and confidence, Rivera must account to Ruiz for the opportunity that arose from the venture.
A financial columnist at Radiant Technologies shares advance information from his upcoming column with family members who trade on it. The columnist's relationship of trust and confidence with his employer makes the misappropriation of the information a breach that supports criminal liability.
Regina Robinson, a therapist, learns during sessions that her patient intends to kill a specific third party. The relationship of trust and confidence between therapist and patient creates a duty to warn the foreseeable victim, overriding the usual confidentiality obligation.
Controlling shareholders of Redwood Bank cause the corporation to repurchase shares only from the majority group at a premium while leaving minority holders with illiquid stock. The relationship of trust and confidence between majority and minority shareholders requires the controllers to justify the disparate treatment or face liability for breach.
No. The existence of a confidential relationship is not sufficient by itself to raise a presumption of undue influence. Suspicious circumstances surrounding the preparation or execution of the donative transfer must also be shown before the burden shifts to the proponent.
Supporting sources
An exculpatory term drafted by the trustee is invalid as an abuse of a fiduciary or confidential relationship unless the trustee proves the term is fair under the circumstances and that its existence and contents were adequately communicated to the settlor.
…one of the parties." ( West v. Knowles (1957) 50 Wn.2d 311 [311 P.2d 689, 692] (conc. opn.).) [^maj-22]: In some instances a confidential relationship may arise between nonmarital partners, and economic transactions between them should be governed by the principles applicable to such relationships. [^maj-23]: Toffler, Future Shock…
…as a general proposition, that a person who acquires special knowledge or information by virtue of a confidential or fiduciary relationship
…to the other the duty of the utmost good faith in all that relates to their common venture. Within its scope they stand in a fiduciary relationship. I assume prima facie that even as between joint adventurers one may not secretly obtain a renewal of the lease of property actually used in the joint adventure where the possibility of…
…36 Conn.Bar J. 175, 179; see also, 118 Am.J.Psych. 734, 735.) Until a patient can trust his psychiatrist not to violate their
…intervention of a lay intermediary, who may control litigation or otherwise interfere with the rendering of legal services in a confidential relationship
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A promoter must make full disclosure to and obtain approval from all persons contemplated as part of the original financing scheme. Disclosure to only some initial subscribers is insufficient. Ratification must extend to every contemplated initial shareholder.
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When parties stand in a relationship of trust and confidence, the law imposes a duty to disclose material facts that would not otherwise be required in an arm's-length transaction. The fiduciary character of the relationship also requires that the terms be fair and fully explained.
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Yes. The relationship can give rise to an affirmative duty to warn an identifiable victim when the therapist learns of a serious threat of violence, even though confidentiality is ordinarily required.
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