In the world of business litigation, two common legal claims often come up: breach of contract and breach of fiduciary duty. While they may sound similar—and are sometimes mistakenly used interchangeably—they refer to very different types of misconduct. Understanding how they differ is essential for protecting your business, whether you’re an owner, partner, or stakeholder.
Both types of breaches can have serious consequences, including financial loss, reputational harm, and even long-term damage to business relationships. Below, we break down the key distinctions between breach of contract and breach of fiduciary duty, and what they can mean for your company.
What Is a Breach of Contract?
A breach of contract occurs when one party fails to fulfill the obligations set forth in a legally binding agreement. Contracts exist to set clear expectations around the scope of work, timelines, payment terms, deliverables, and more. When one party falls short—whether by failing to perform, delaying performance, or not meeting agreed-upon standards—they may be liable for breach.
Common examples of breach of contract include:
- Failing to deliver goods or services on time
- Performing work that doesn’t meet the agreed specifications
- Charging more than was agreed upon
- Failing to make payments in full or on schedule
Sometimes, breaches are intentional. Other times, they result from external factors. Many contracts include force majeure clauses to account for unforeseen events (like natural disasters or supply chain crises) that make performance impossible or impractical. But outside of those exceptions, a breach can open the door to legal claims and financial liability.
What Is a Breach of Fiduciary Duty?
A breach of fiduciary duty goes deeper than a simple broken agreement. It involves a failure to uphold a legal obligation of trust and loyalty in a relationship where one party is expected to act in the best interest of another. This type of duty is common in partnerships, corporations, trusts, and between certain professionals and their clients.
Fiduciary relationships often exist between:
- Business partners
- Corporate officers and shareholders
- Attorneys and clients
- Trustees and beneficiaries
When someone with a fiduciary duty acts in their own interest—or in a way that harms the other party—they may be liable for a breach of fiduciary duty. This can occur with or without a written contract.
Examples include:
- Self-dealing (e.g., steering business opportunities to oneself instead of the company)
- Misappropriation of funds or business assets
- Fraudulent misrepresentation or concealment
- Insider trading or disclosing confidential information for personal gain
Unlike breach of contract claims, which are limited to the terms of the agreement, breach of fiduciary duty claims can involve broader legal and ethical responsibilities.
Can Both Breaches Happen at the Same Time?
Yes—these two types of legal claims often overlap. For instance, if a partner in a business venture both violates the partnership agreement and acts in bad faith by diverting company funds to a personal account, that behavior could constitute both a breach of contract and a breach of fiduciary duty.
In such cases, courts may award different types of damages for each claim, including compensatory damages, equitable remedies, and even punitive damages in severe cases of misconduct.
What Can You Do If Your Business Is Harmed?
If your business has suffered because of either a contract violation or a fiduciary breach, it’s important to act quickly. Legal remedies may include:
- Filing a civil lawsuit for damages or specific performance
- Seeking injunctive relief to stop ongoing harm
- Pursuing settlement negotiations to resolve the matter privately
Delays can lead to increased losses or weakened legal standing. The sooner you consult with an experienced business attorney, the sooner you can protect your business interests and chart a path forward.
Final Thoughts
Understanding the difference between breach of contract and breach of fiduciary duty helps you identify potential risks and act when something goes wrong. Whether it’s a failed agreement or a betrayal of trust, your business doesn’t have to face the consequences alone.
At Lesak, Hamilton, Calhoun & Pontieri, we help business owners assess their legal options, pursue recovery, and safeguard what they’ve built. If you suspect a breach—of any kind—we’re here to help you take the next step.