Damage liability when neglecting the duty of loyalty

The duty of loyalty is according to Nordic doctrine a general principle of law. It does not need to be expressed in either law nor agreement in order to be in effect. Instead, when applying the law it is assumed that contracting parties have an obligation to remain loyal to each other. This has been stipulated by the Swedish Supreme Court on several occasions, among other in ”Kravmjölken” (NJA 2017 s. 203), ”Skogssällskapet” (NJA 2017 s. 1195) och ”Leksaksaffären i Vimmerby” (NJA 2018 s. 171).

In general, the duty of loyalty is defined as a duty to protect and defend an opposing party’s interest in a contractual relationship. The extent is hard to determine and must be “[…] decided by an overall assessment of the circumstances in each specific case.” states the Supreme Court in a recent judgement, case no. T 5613-20, p. 15. In the same judgement the court also ruled that the duty of loyalty is very extensive, so extensive that the court imposed damages for violating the duty of loyalty.

According to the Supreme Court, the basis when assessing the extension of the duty of loyalty must always be the terms agreed upon between the parties and that the parties shall do what they can in order to uphold these terms. This may also include to “[…] abstain from certain actions which could be to the detriment for the opposing party” (T 5316-20, p. 16), even if such action otherwise would be beneficial for the acting party. Thus, it’s important to remember that all actions taken in relation to a contractual relationship and/or specific agreement may impact the duty of loyalty if the contracting party’s interests are not protected and defended sufficiently.