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Contracts • Defenses to Enforcement and Formation
K#070
Legal Definition
Generally, there is no duty to disclose information to another party. However, where nondisclosure is wrongful (e.g., the parties have a fiduciary-like relationship, or one party actively conceals) the innocent party can rescind.
Plain English Explanation
Generally, people have no duty to say anything, only a duty to not lie when they do choose to say something. There are two exceptions to this rule:
The first exception is when there is a special relationship between the parties. For example, if you are paying someone for their advice and guidance, then they have an obligation to provide that advice and guidance.
The second exception is when the party that chooses to not disclose something actively prevents the other party from discovering the information. For example, imagine if Bob were trying to sell his car. Bob realizes that there is a huge dent on the car's bumper and it will make people less likely to pay full price. When he invites people over to view the car, Bob always stands in front of the dent, concealing it from view. When people ask, "Is there any damage to the car?" Bob responds, "The car is as-is." Here, Bob didn't lie, and he doesn't have a duty to disclose the specific damage, but by standing in front of the dent purposefully to hide it from purchasers, Bob is being a jerk and the law will allow the buyer to rescind the contract upon discovering the concealed damage.
The first exception is when there is a special relationship between the parties. For example, if you are paying someone for their advice and guidance, then they have an obligation to provide that advice and guidance.
The second exception is when the party that chooses to not disclose something actively prevents the other party from discovering the information. For example, imagine if Bob were trying to sell his car. Bob realizes that there is a huge dent on the car's bumper and it will make people less likely to pay full price. When he invites people over to view the car, Bob always stands in front of the dent, concealing it from view. When people ask, "Is there any damage to the car?" Bob responds, "The car is as-is." Here, Bob didn't lie, and he doesn't have a duty to disclose the specific damage, but by standing in front of the dent purposefully to hide it from purchasers, Bob is being a jerk and the law will allow the buyer to rescind the contract upon discovering the concealed damage.
Hypothetical
Hypo 1: Bob wants to sell his car. Bob is aware that the car leaks oil and has various mechanical issues. Bob puts an ad in the paper selling his car, and includes information that the car leaks oil and lists a handful of mechanical issues. Bob forgets to list that the car needs new spark plugs. When Sam comes to look at the car, Bob lets him inspect the vehicle and even offers to let Sam bring a mechanic to look at it. Sam agrees to buy the vehicle. Later, Sam's mechanic lets him know it also needs new spark plugs. Sam calls Bob about it and Bob says, "Dang, sorry, I forgot to mention that." Result: Bob had no duty to disclose that it needed new spark plugs, and he made no claims or representations that the spark plugs were not a problem. Moreover, Sam had every ability to inspect the vehicle before purchase. This would not constitute concealment or misrepresentation, so Sam has no right to rescind the agreement.
Visual Aids
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