What's Fiduciary Mean to a GC?

July 16, 2026

Most general contractors never owe a true fiduciary duty. The legal and ethical duties they do owe are serious—and far easier to meet with rigorous project accounting.

This article is for general informational purposes only and is not legal advice. Construction law varies by contract, project, and jurisdiction. Consult qualified counsel about your specific circumstances.

Most general contractors will never owe a true fiduciary duty, but nearly all of them spend their careers handling other people's money anyway.

"Fiduciary" gets used loosely on job sites and very precisely in courtrooms. A fiduciary must put another party's interests ahead of its own; an ordinary GC is an independent business that owes the duties created by its contract and applicable law. But those duties are already substantial: perform the work, bill accurately, account for reimbursable costs, protect statutory trust funds, deal in good faith. These responsibilities can carry criminal exposure when project money goes to the wrong place.

So the practical question is rarely "is the contractor a fiduciary?" It's what the contract says, how much discretion the contractor exercises over money and procurement, whether state law treats project receipts as trust funds, and who, owner, subcontractor,or supplier, claims to be the beneficiary when something goes wrong. Underneath all of those questions sit the same four demands: responsibility for other people's money, accountability for how it moved, transparency about what it bought, and incentives that don't implicitly pit builder against client.

Where the fiduciary line actually sits

Most courts do not presume that an owner–contractor relationship is fiduciary. Construction contracts are negotiated at arm's length, and each party is expected to protect its own interests in the agreement. The line moves when the facts go further: language accepting a "relationship of trust and confidence," promises to act primarily in the owner's interest, authority to bind the owner or spend with little oversight, or a large gap in expertise combined with real reliance. The WilmerHale overview of fiduciary claims against construction and design professionals emphasizes that greater discretion, control, and agency-like authority make a fiduciary finding more likely, and a 2025 construction-law analysis of "trust and confidence" clauses reaches the same practical conclusion: the words matter, and so does the real allocation of authority.

Beyond the letterof the law, for many clients, a construction project is the largest check they'll ever write, handed to a company whose costs they cannot independently verify. Whatever a court would say, that relationship is strengthened when the client can see where the money went. So don't debate labels while the project is underway, run the work so the record demonstrates accurate billing, authorized decisions, and timely disclosure, and the word "fiduciary" matters much less.

Cost plus: transparency is the bargain

In a cost plus contract, the owner reimburses defined costs of the work and pays an agreed fee, with or without a guaranteed maximum price. The contractor's entitlement depends entirely on what the contract defines as reimbursable, which is why AIA's A102 cost-plus-with-GMP agreement is built around open-book accounting and the actual cost of the work. (For how the fee structure itself shapes incentives, see Fixed Price vs. Cost Plus: Who Gets the Savings?.)

One nearly universal cost-plus feature deserves its own mention: negotiated labor rates. Rather than reimbursing raw payroll, most cost-plus contracts bill self-performed labor at an agreed rate: a wage component plus a negotiated markup for burden and overhead. Done well, this aligns incentives. The client gets a predictable, auditable rate, and the contractor recovers real employment costs without litigating every payroll run.

Cost plus does not automatically mean fiduciary. In Goes v. Vogler, the Nebraska Supreme Court held that a cost-plus arrangement creates no fiduciary duty as a matter of law—while still requiring that billed costs be reasonable and proper. Maryland went the other way in Jones v. J.H. Hiser Construction Co., where the contractor had accepted a relationship of trust and confidence and agreed to keep detailed accounts; the court held it had a duty to track escalating costs and warn the owners in time. Same "cost plus" label, very different duties—which is why national templates are starting points, not fifty-state answers.

Notice what actually sank the contractor in Hiser: not the costs themselves, but the failure to track and disclose them. That points to something contractors often miss—transparency is protection for the builder, not just the client. Nearly every fiduciary or trust-fund claim is, at its core, a claim about missing information: costs that can't be tied to the work, forecasts that were never updated, money that can't be traced. The procedures a good cost-plus contract requires are the duties themselves. A contractor whose accounting system produces those records as a byproduct of normal operations has largely fulfilled the obligation before anyone thinks to allege a breach.

The test of that system is the monthly package. A reasonable reviewer should be able to answer four questions quickly: What was committed? What has been billed? What has been paid? What is now forecast to complete the work?

CM at risk: one firm, two roles

Construction manager at risk combines preconstruction advice with responsibility for construction. AIA describes the CMc structure as merging the contractor and construction-manager functions in one entity, commonly with direct subcontracts and a GMP.

The two-phase structure creates a recurring tension. During preconstruction, the CM shapes scope, evaluates trade bids, and recommends procurement strategies—services that look advisory, even agency-like. During construction, the same company is a contracting party with its own fee, contingency, and risk under the GMP. The contract should make that boundary visible: when the CM is an adviser versus a constructor, whether it can bind the owner and within what limits, and how trade selection, buyout savings, and contingency are disclosed and shared. A GMP allocates cost risk; it does not erase duties created by advisory authority, contract language, or construction-fund statutes.

State law can change the answer

Even where the owner–GC contract creates no fiduciary relationship, trust-fund and diversion statutes can impose one by force of law—usually for the benefit of subcontractors and suppliers rather than the owner.

New York: Article 3-A creates project-specific trusts

New York's Lien Law Article 3-A makes funds received by a contractor assets of a separate statutory trust for each contract, held for subcontractors, laborers, suppliers, and design professionals. The accounting itself is a legal control: Section 75 requires books that allocate deposits and withdrawals among the separate trusts, failure to keep them is presumptive evidence of diversion, and Section 79-a can treat misapplication as larceny. The beneficiary distinction is real: in Ho v. Star Contractors, homeowners lacked standing under Article 3-A—the statute protects the people downstream of the contractor, not the owner. We cover the recordkeeping mechanics in our New York trust-fund guide.

Texas: construction payments are trust funds

Texas Property Code Chapter 162 treats qualifying construction payments as trust funds, and its reach is personal: officers, directors, and agents who control the funds can be trustees individually, with civil and criminal exposure for misapplication. Texas also rewards clean drafting—a reasonable fee specified in a written contract can fall outside the trust when the statutory conditions are met, which makes accurate earned-fee accounting a legal safeguard, not just bookkeeping. More in our Texas trust-fund guide.

Michigan: spending ahead of the project is evidence of fraud

Michigan's Builders' Trust Fund Act treats construction payments as trust funds for the payer, subcontractors, laborers, and suppliers on that improvement. Under MCL 570.153, using project money for another purpose before the project's obligations are paid is evidence of intent to defraud—the statute exists to stop contractors from covering old jobs with new jobs' money. Our Michigan trust-fund guide covers segregation and proof in detail.

California and Florida: diversion and priority

California Penal Code Section 484b makes it a public offense to receive construction funds and willfully divert them from their purpose. Florida Statutes Section 713.345 requires payment recipients to apply funds to amounts already due for prior labor and materials, with criminal and license consequences for knowing misapplication. The vocabulary differs state to state; the operational control does not: connect every receipt to its project, and never let one job's money quietly fund another.

What is Buildplus?

Buildplus is the payments, expenses and invoicing platform built for contractors running cost-plus jobs. Every payment, swipe and reimbursable expense stays tied to the project it belongs to.

Start Building

A control system for general contractors

Legal standards vary. The controls that satisfy them mostly don't:

Segregate project funds. Know which project's money is which—by account where the statute or common sense calls for it, and by ledger everywhere.
Separate profit from revenue. An owner payment is not earnings. Fee is earned under the contract; cost is reimbursed against the work. Keeping them distinct is what makes a Texas-style fee carve-out—and an honest income statement—possible.
Keep auditable records. Every billed amount should trace to a contract, commitment, invoice, and payment without archaeology.
Align invoice to budget. Bill against the budget line and commitment that authorized the cost, and resolve duplicates, credits, and rejected costs before they reach the client.
Keep cost-to-complete up to date. Historical cost reports don't satisfy a duty to warn. A current forecast does.
Pay and document accepted subcontracts. Due dates, lien waivers, retainage, and disputes—tracked per subcontract, because in trust-fund states these are your statutory beneficiaries.
Communicate quickly and clearly. A disputed cost or projected overrun gets harder to resolve every day it hides inside the next draw.
Keep good records. Retain the trail—approvals, allocations, and the reasons for unusual ones—for the contractual and statutory period.

None of this should require heroics. A project accounting system that produces a clean monthly package, keeps the control estimate current as costs land, and gives the client appropriate visibility into the ledger and subcontracts turns each item above from a task into a default. The duties get performed whether or not anyone is thinking about them.

Responsibility you can prove

A general contractor can usually avoid becoming a true fiduciary—by negotiating "trust," "best interest," and agency language deliberately, and by keeping authority where the contract puts it. What no contractor can avoid is the underlying responsibility: money received for a project belongs to that project's work and the people who performed it, and both the law and the client expect you to show it.

The contractors who carry that responsibility comfortably are not the ones with the best legal arguments. They are the ones whose records make the argument unnecessary—every receipt, payment, and forecast already allocated, documented, and visible. Good project controls cannot eliminate legal risk. But they make compliance and candor provable, they protect the builder as much as the client, and they turn the hardest questions a project can raise into questions the monthly package already answered.