Moving Along the Continuum of Loyalty From a Standard Towards Rules

This article focuses on the location of the duty of loyalty—a unique legal norm in Common Law jurisdictions—both actual and desirable, on the continuum between rules and standards. A rule is a relatively ‘closed’ technical norm, at a high level of specificity; it requires little judicial discretion. A standard is an ‘open’ norm, with a greater degree of flexibility, that requires the exercise of discretion. The insights from this jurisprudential perspective are used to reveal the preferred way for further developing the duty of loyalty. The article explains that ‘loyalty,’ intuitively classified as a ‘pure’ standard, has been reconstructed over time as more specific rules. Moreover, it suggests that, ideally, this movement should continue; namely, when applying loyalty to a specific case, courts should include informative content that would promote predictability. It then illustrates that, unfortunately, this road is not always taken by the courts. A decision to retain loyalty as an ad hoc standard, or an inverse attempt to delineate the boundaries of this norm, has implications on the certainty, consistency, and ethical content of the law. Considering that this duty spreads across different legal fields, personal and commercial, the significance of this discussion becomes all the more evident.