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This chapter argues that we should understand the employee duty of loyalty as a contractual duty, not a fiduciary duty that attaches by virtue of employee status. The chapter considers several risks associated with a contract paradigm but concludes that those risks are less acute than they might at first appear. It examines several possible contractual conceptions of the duty of loyalty, including those in which it is imputed by public policy or inferred as an element of party agreement. The chapter ultimately argues that understanding the duty as an instance of the general duty to perform in good faith makes the best sense of a historically suspect obligation. This understanding not only redeems the duty of loyalty as a reasonable obligation of employees but also generates guidance on how the duty can be construed in the most normatively satisfactory way. In particular, understanding the duty of loyalty as an instance of the duty of good faith suggests that its scope should hinge on other terms of an employment contract, including the scope of employer discretion and the terms of employee exit.

This chapter challenges the argument that one of Equity’s most distinctive doctrines, fiduciary law, must be fused with a common law doctrine—the law of contract. In particular, it highlights the disadvantages of transforming the equitable duty of loyalty into an ordinary contractual obligation. The chapter first considers the ‘contractarian’ interpretation of fiduciary law according to which fiduciary duties are no more than a species of contractual obligations before explaining why, in contrast with the contractarian argument, Equity was right in claiming that the fiduciary relationship was essentially different from contract. After making the case of why fiduciary law should be treated as a sui generis equitable doctrine, the chapter examines two features of equitable fiduciary law that will change dramatically if the fusion suggestion is adopted (the language in which it is set and the way into the relationship) and shows the adverse consequences of moving in that direction. It concludes with the contention that the concept of ‘conscience’ still has an active role to play in the legal reasoning about fiduciaries.

This introduction outlines contributors’ key contributions, while also providing analysis of the background literature on contract, status, and fiduciary law. The contributions to this book demonstrate that inquiries into the relationship between contract, status, and fiduciary law can offer new insights into both contract theory and fiduciary theory. While the existing literature often focuses on the possibility that fiduciary relationships are contractual in nature, the present volume offers innovative accounts of how these principles interact across fields. The resulting work can help us better understand status relationships, voluntary undertakings, duties of loyalty, equity, employment law, tort law, the law of remedies, political theory, and the theory of the firm.

This chapter explores the role of criminal law as an additional sanction against the breach of existing civil obligations in the contract. In the modern context, this chapter examines the ways in which property offences in criminal law might be used to deter contractual breaches. It focuses on the offence of fraud in the Fraud Act 2006, and in particular the role of criminalization where there has been a failure to disclose information. To this end, the chapter examines the current scope of disclosure obligations under the employment contract, focusing on the implied duties of trust and confidence and loyalty. There is considerable uncertainty about the scope and content of disclosure obligations, which raises serious rule of law concerns where these contractual obligations are, in effect, criminalized as instances of fraud. There is also a more general reluctance in English criminal law to criminalize omissions rather than positive acts, and a failure to disclose is an omission.

This chapter conceptualizes financial fiduciaries law as a private law institution that enhances individual autonomy by enabling people to safely delegate authority over a significant aspect of their welfarist interests. This requires law to respond to the complicated incentive structure created by managing other people’s money, which implies a discretionary authority susceptible to carelessness and abuse. It also entails that law should ingrain the moral vocabulary of the loyalty injunction. These prescriptions justify the traditional structure of the duty of loyalty doctrine, composed of the strict sole-interest rule alongside a long list of exceptions and exemptions. But our analysis also demonstrates that lawmakers should reexamine their fiduciary pay as an exception to the duty of loyalty that should be carefully scrutinized. Finally, rules of financial fiduciaries law should be formulated as sticky defaults that are tilted in the service of relatively weak and unsophisticated beneficiaries (or settlors).

Economists who study the theory of the firm strive to draw a line between firms and markets. This line corresponds to the line lawyers draw between fiduciary and nonfiduciary relationships. The Critical Resource Theory (CRT) of fiduciary relationships is motivated by the property-rights theory of the firm. CRT holds that the distinguishing feature of fiduciary relationships is that a fiduciary exercises discretion with respect to a critical resource belonging to the beneficiary, whereas most contracting parties exercise discretion only with respect to their own performance under the contract. This chapter refines the description of ‘resources’ under CRT using the property-rights theory of the firm and the resource-based view of the firm and extends the analysis of CRT to two important implications flowing from the basic structural insight: (1) while some features of fiduciary relationships are traceable to the logic of contract and some features are traceable to the logic of property, fiduciary relationships are unique hybrid institutions; and (2) the distinctive duty of loyalty that is imposed on fiduciary relationships is designed to protect the beneficiary’s property-like interest in critical resources.

This chapter centers on a technique that managers and controlling shareholders may use to divert value from the corporation: related-party transactions. These transactions range from traditional self-dealing to more subtle forms of potential misappropriation of company value, such as compensation agreements, intercompany guarantees, insider trading, and the usurpation of corporate opportunities. Despite the potential for abuse, related party-transactions provide countervailing economic benefits and are rarely outlawed. Instead, the representative “core jurisdictions” employ a variety of legal strategies to police them, including: applying affiliation strategies through disclosure requirements and dissolution rights; intervening on agent incentives by requiring disinterested board approval; granting decision rights to shareholders; and imposing legal constraints such as prohibitions, the duty of loyalty, and the special regime of group law. The chapter concludes by analyzing the effectiveness of the different approaches to related-party transactions in core jurisdictions in view of their enforcement, and their relationship to the underlying ownership structures.

This chapter presents the rules under EU law and international law that enable the EU to participate in the work of other international organizations. It explains the process of the EU becoming and acting as a full member in an international body composed of States, such as the Food and Agriculture Organization of the United Nations (FAO) or the World Trade Organization (WTO). When full membership is legally not possible, the EU is often granted the status of an observer. In this regard, the chapter presents pertinent examples from the UN and its specialized organizations. It puts particular emphasis on recent European Court of Justice (ECJ) case law, including Germany v Council (‘OTIF I’), where the Court underlined that the presentation of common EU positions is necessary in international organizations, even if the EU is not a full member thereof and has not legislated in the entire field of action covered by that organization.

This chapter deals with the board. It analyses the rationales, within different types of company, for the division of powers between (a) the shareholders and the board, and (b) the board and the senior management of the company. The second part of the chapter shows how the rules on the composition of the board (mainly to be found in the Corporate Governance Code) and the directors’ statutory core duty of loyalty fashion the accountability of the board. That accountability is primarily to the shareholders, but non-shareholder interests are recognised, in different ways, in both the Code and the statutory duty.