Owners and managers of a business have a number of different duties, enshrined in law, to the business. These duties are designed to protect other owners and the business itself from a single owner. One important duty to understand is the duty of care. This duty places responsibility on each decision maker to use reasonable care when dealing with others and in doing business transactions.
Some examples of how the duty of care applies to a business:
- Property: Businesses that own property have a duty of care to customers who come onto their property. Customers, for example, must be treated with a high level of care and protected from any number of potential dangers. You want to keep customers happy and safe and a business has a duty of care to look out for them and mitigate any risks.
- Products: Manufacturers of products have a duty of care to the consumers who buy and use their product in order to make them safely and to advertise them accurately. This duty of care also requires manufacturers to comply with industry safety standards and provide the numerous warnings about any dangers a product may have.
- Owners: For business owners and managers, the duty of care means acting in good faith and making reasonable decisions about caring for the best interest of the business. While the business is it’s own entity, it requires its owners to look out for it and make its decisions, so in return, the law requires those decision-makers to act in good faith in doing so.
The Business Judgement Rule
When a court evaluates the decisions a business makes, they’ll use the business judgement rule. This is the presumption that in making a decision, the directors of a company would act in good faith and take actions that are in the best interest of the company. They’ll assume the directors acted as a reasonable person would act, though of course this standard is a fiction. A reasonable person pays attention to all risks, considers the possibility that, due to his decisions, someone may be injured, and chooses the safest course of action.
In some specialized cases where the duty of care is applied, such as with medical malpractice, the doctor’s actions are considered against what another doctor in the field would have done. Businesses and professionals are held to the standards of their industry when applying the reasonable duty of care standard.
If you have questions about how thus duty of care applies to your business or your role within the business, reach out to the attorneys at Chase Law Group, P.C. Call (310) 545-7700 to set up a consultation. Our attorneys can walk you through the details of how the different duties apply to your business, what steps you can take to mitigate risks, and how the standard is applied to your industry.