Duty or obligation?

The words “duty” and “obligation” are important words in the English legal dictionary. Similarly, the words zeren and yiwu are important words in the Chinese legal dictionary. In this article, I will look at the ways in which these words are used in each language. I will also examine some of the differences in the legal concepts that they represent under the common law and PRC law.

For lawyers drafting documents and writing advice in a bilingual cross-border context, it is sometimes difficult to know which word to use, particularly in view of the fact that these words are often used interchangeably in a colloquial context. In addition, the close relationship between these words and the concepts that they represent in each legal system means that there is often no true equivalence between English and Chinese. As a result, it is necessary for lawyers to understand how these words are used in each legal system before they can choose the most appropriate word to use in any given context.

Meanings in English

In a common law context, the word “obligation” has a broader meaning and is used in a wider range of circumstances than the word “duty”. For example, we talk about “contractual obligations” (i.e. obligations that are created by contract) and we also talk about “legal obligations” (i.e. obligations that are imposed by law, whether under case law or statute). In each case, the word refers to requirements that must be met as a result of specific circumstances that apply.

The word “duty”, on the other hand, has a narrower meaning. It is generally used to refer to a requirement that is imposed by law (either case law or statute) as a result of a special relationship that exists or a special position that a person occupies. For example, we talk about a fiduciary duty that is owed by a trustee to a beneficiary, by a solicitor to a client and by an agent to a principal. And in the case of directors, we talk about the duties that they owe to the company of which they are directors.

An important distinction between a “contractual obligation” and a “duty” is that a duty often arises independently of contract and is imposed by law. Even where the relationship that gives rise to the duty is created by contract, the law usually defines the content of the duties and imposes them on a mandatory basis (i.e. it is not possible for the contract to exclude or limit the duty).

Thus, a duty is often imposed on an involuntary basis as a result of a special relationship that exists or a special position that a person occupies, whereas a contractual obligation involves an arrangement under which each party agrees to be bound. In this sense, duties are imposed; contractual obligations are voluntarily assumed.

Two types of duty that have had a significant influence in common law systems are the fiduciary duty, as referred to above, and the duty of care that arises under the law of torts. Let’s look briefly at each of these duties.

Fiduciary duty

A fiduciary duty is one of the most important concepts created by that body of law that is referred to in common law jurisdictions as “equity”. In a leading English case concerning the professional negligence of solicitors, the judge stated that “a fiduciary is someone who has undertaken to act for and on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence” (Bristol & West Building Society v Mothew per Lord Millett).

A fiduciary duty is sometimes referred to as a “duty of loyalty”. In fact, the word “fiduciary” has its roots in the Latin word fides, meaning “faith”. Interestingly, the duty is normally expressed in terms of conduct that the fiduciary must not undertake rather than conduct that the fiduciary must undertake.

There are two key aspects to the conduct that persons in a fiduciary relationship must not undertake: (1) they must not put their personal interests before their duty; and (2) they must not profit from their position as a fiduciary, unless the principal consents. In other words, they must not place themselves in a position where there is a conflict between their own interests and the interests of the person to whom they owe the fiduciary duty. They must also avoid a conflict of interest between the fiduciary duties that they owe to two or more persons (for a discussion about conflicts of interest involving lawyers, see China Business Law Journal volume 1 issue 4, Cases, matters and conflicts of interest).

A former partner of Linklaters Shanghai, Andrew Godwin teaches law at Melbourne Law School in Australia, where he is an associate director of its Asian Law Centre. Andrew’s new book is a compilation of China Business Law Journal’s popular Lexicon series, entitled China Lexicon: Defining and translating legal terms. The book is published by Vantage Asia and available at www.vantageasia.com