There are many cases in which someone has the duty to act with another person or entity’s best interests in mind. This is known as having a fiduciary duty. Rather than only thinking about their own best interests, that person has to put the other party first.
One example of this could be if two people are business partners. With corporations, there is generally a fiduciary duty owed to investors and shareholders. But with small businesses, such as a partnership between just two people, the fiduciary duty may be owed to the other business partner and to the company itself. There aren’t shareholders, but this duty can still exist.
How is each party expected to act?
For one thing, there is a duty of care. Business partners need to consider how the actions they take will impact the business. They should take care to avoid doing things that would harm the company, especially if it is for their own benefit. There’s also a duty of loyalty, which means that the business partner should honestly attempt to work toward the company’s best interests, remaining loyal to the business partnership as long as they are bound by the contract.
For example, say that a business partner is approached by a third party who owns a similar company, and that person offers to buy business secrets or protected intellectual property. Selling it may be very beneficial for that specific business partner but could cause dramatic financial harm to the company. If they take this step without consulting the other business partner, they have breached their fiduciary duty by putting their own financial desires ahead of the business.
Disputes over these types of violations can be very complex, and it’s important for people to know exactly what legal steps to take.