✏️ Sample Solved Problem (IRAC Method) — KSLU Property Law Notes

✏️ Sample Solved Problem (IRAC Method)

Problem: T, a trustee holding land for B, purchases the trust land himself at a fair price through a third-party agent, without B’s informed consent. B later discovers this and seeks to set the sale aside. Can he?

I — Issue

Whether a trustee’s purchase of the trust property for himself is valid, or voidable at the instance of the beneficiary, even where a fair price was paid.

R — Rule

A trustee owes a fiduciary duty of undivided loyalty: he must not place himself in a position where his interest conflicts with his duty, and must not profit from the trust. The self-dealing rule makes a trustee’s purchase of the trust property voidable at the beneficiary’s option irrespective of the fairness of the price or the trustee’s good faith; any advantage gained is held on constructive trust for the beneficiary.

A — Analysis

The decoy is the fair price — T paid full value, used a third-party agent and acted honestly, so the sale looks unimpeachable on its commercial merits. But the self-dealing rule is prophylactic, not compensatory: it does not ask whether this transaction was fair; it forbids the conflict itself, because a trustee charged with selling for the beneficiary cannot simultaneously be the buyer seeking the lowest price. Routing the purchase through an agent does not cleanse it — the trustee remains the real purchaser. The price being fair is therefore irrelevant; what matters is that duty and interest collided without B’s informed consent.

C — Conclusion

B can set the sale aside. The trustee’s self-dealing purchase is voidable at the beneficiary’s option regardless of the fair price; T holds any benefit on constructive trust for B.

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