Reliance on experts: Overview, definition, and example
What is reliance on experts?
Reliance on experts is a legal and contractual concept that allows individuals—especially directors, officers, or decision-makers—to depend in good faith on the advice, reports, or opinions of professionals with specialized knowledge. These experts might include lawyers, accountants, engineers, appraisers, or other qualified professionals. In many legal contexts, especially corporate governance, relying on experts can serve as a defense against claims of negligence or breach of duty if decisions are made based on their informed advice.
Why is reliance on experts important?
Reliance on experts is important because it recognizes that decision-makers, such as corporate directors, cannot be expected to possess deep expertise in every technical area they oversee. By allowing them to lean on professionals, it promotes more informed and responsible decision-making. Legally, this reliance can help shield directors and officers from liability—as long as the reliance is reasonable and the expert is acting independently and competently.
Understanding reliance on experts through an example
A board of directors is deciding whether to approve a major acquisition. Before making their decision, they hire an independent financial advisor to assess the deal's fairness. If the board votes to proceed based on the advisor's report, and the deal later proves financially unwise, the directors may still be protected from liability under the "business judgment rule" because they reasonably relied on an expert's informed opinion.
Example of how reliance on experts may be referenced in a contract or governance document
Here’s how reliance on experts may appear in a corporate bylaws or indemnification clause:
"In discharging their duties, the Directors may rely in good faith upon the records of the Corporation and upon such information, opinions, reports, or statements presented by officers, employees, legal counsel, accountants, or other persons as to matters the Director reasonably believes are within such person’s professional or expert competence."
Conclusion
Reliance on experts is a practical and legally recognized principle that enables decision-makers to act confidently and responsibly by consulting professionals in complex or technical matters. It supports good governance and risk management while providing a layer of legal protection when decisions are challenged. Businesses should clearly define this right in their governing documents and ensure that expert consultations are well-documented and made in good faith.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.