What is Fiduciary Duty?

Fiduciary duty is usually broken into three parts. The duty of care requires directors to be informed before deciding — read the bid, review the financials, ask questions. The duty of loyalty requires putting the association ahead of personal interests and disclosing conflicts. The duty of good faith requires acting within the authority the documents grant, consistently and without favoritism.

In practice, courts apply a business judgment rule: directors are protected if they acted informed, in good faith, and within their authority — even if the decision turns out badly. The protection disappears when directors decide arbitrarily, ignore the governing documents, or benefit personally.

Documentation is the defense. Meeting minutes showing the board reviewed three bids, discussed the tradeoffs, and voted in an open meeting are worth far more than a good outcome with no paper trail.