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A Theory of Fiduciary Relationships: Non-Contractual Foundation of the Duty of Loyalty, Disgorgement Damages, and Strict Liability


  • Katsuhito Iwai

    (Division of Arts and Sciences, International Christian University, Department of Political Economy, Musashino University, Policy Research Department, Tokyo Foundation, Faculty of Economics, University of Tokyo)


A fiduciary is a person who undertakes to act for the benefit of another person. He owes the duty of loyalty to beneficiary, is required to disgorge any unauthorized gain from his position, and has the burden of disproving his disloyalty in litigation. This article presents a theory that unifies a wide variety of human relationships as fiduciary relationships and explains how the law regulating these relationships works as a coherent legal system. Its theoretical foundation is the legal impossibility of self-contract, its analytical framework is a variant of trust game, and its justificatory principle is that of both corrective justice and Pareto optimality.

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  • Katsuhito Iwai, 2010. "A Theory of Fiduciary Relationships: Non-Contractual Foundation of the Duty of Loyalty, Disgorgement Damages, and Strict Liability," CIRJE F-Series CIRJE-F-766, CIRJE, Faculty of Economics, University of Tokyo.
  • Handle: RePEc:tky:fseres:2010cf766

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    References listed on IDEAS

    1. A. Mitchell Polinsky & Yeon-Koo Che, 1991. "Decoupling Liability: Optimal Incentives for Care and Litigation," RAND Journal of Economics, The RAND Corporation, vol. 22(4), pages 562-570, Winter.
    2. Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
    3. Rabin, Matthew, 1993. "Incorporating Fairness into Game Theory and Economics," American Economic Review, American Economic Association, vol. 83(5), pages 1281-1302, December.
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