Research Handbook on Fiduciary Law
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Research Handbook on Fiduciary Law

Edited by D. G. Smith and Andrew S. Gold

The Research Handbook on Fiduciary Law offers specially commissioned chapters written by leading scholars and covers a wide range of important topics in fiduciary law. Topical contributions discuss: various fiduciary relationships; the duty of loyalty and other fiduciary obligations; fiduciary remedies; the role of equity; the role of trust; international and comparative perspectives; and public fiduciary law. This Research Handbook will be of interest to readers concerned with both theory and practice, as it incorporates significant new insights and developments in the field.
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Chapter 8: Motivation, information, negotiation: why fiduciary accountability cannot be negotiable

Amir N. Licht

Abstract

In the debate over contractual freedom or enabling-versus-mandatory rules in fiduciary law, those who do not adhere to an unbridled contractarian approach tend to justify fiduciary law’s strict posture by appealing to transaction cost reasoning. In this view, fiduciary law more efficiently sets rules that the parties would adopt or, also efficiently, sets penalty default rules that they would not adopt. Drawing on new institutional economics and information economics, this chapter advances another theory on the appropriate scope of contractibility with regard to fiduciary loyalty. This highlights information asymmetries that are more tenacious than those stemming from information production costs – to wit, asymmetries due to unobservable and unverifiable information. These asymmetries provide a compelling justification for a strict, full-disclosure-based accountability regime. A similar analysis vindicates a rather similar legal policy in traditional insurance law, in which insurance relations are based on utmost good faith and impose a duty of full disclosure on the insured.

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