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n. fraudulent failure to reveal information which someone knows and is aware that in good faith he/she should communicate to another. Examples include failure to disclose defects in goods sold (the horse has been sick, the car has been in an accident), leaving out significant liabilities in a credit application, or omitting assets from a bankruptcy schedule to keep them from being available for distribution to creditors. Such concealment at minimum can be a cause for rescission (cancellation) of a contract by the misled party or a civil lawsuit for fraud. (See: fraud)
CONCEALMENT, contracts. The unlawful suppression of any fact or
circumstance, by one of the parties to a contract, from the other, which in
justice ought to be made known. 1 Bro. Ch. R. 420; 1 Fonbl. Eq. B. 1, c. 3,
Sec. 4, note (n); 1 Story, Eq. Jur. Sec. 207.
2. Fraud occurs when one person substantially misrepresents or conceals a material fact peculiarly within his own knowledge, in consequence of which a delusion exists; or uses a device naturally calculated to lull the suspicions of a careful man, and induce him to forego inquiry into a matter upon which the other party has information, although such information be not exclusively within his reach. 2 Bl. Com. 451; 3 Id. 166; Sugd. Vend. 1 to 10; 1 Com. Contr. 38; 3 B. & C. 623; 5 D. & R. 490; 2 Wheat. 183; 11 Id. 59; 1 Pet. Sup. C. R. 15, 16. The party is not bound, however, to disclose patent defects. Sugd. Vend. 2.
3. A distinction has been made between the concealment of latent defects in real and personal property. For example, the concealment by an agent that a nuisance existed in connexion with a house the owner had to hire, did not render the lease void. 6 IV. & M. 358. 1 Smith, 400. The rule with regard to personalty is different. 3 Camp. 508; 3 T. R. 759.
4. In insurances, where fairness is so essential to, the contract, a concealment which is only the effect of accident, negligence, inadvertence, or mistake, if material, is equally fatal to the contract as if it were intentional and fraudulent. 1 Bl. R. 594; 3 Burr. 1909. The insured is required to disclose all the circumstances within his own knowledge only, which increase the risk. He is not, however, bound to disclose general circumstances which apply to all policies of a particular description, notwithstanding they may greatly increase the risk. Under this rule, it has been decided that a policy is void, which was obtained by the concealment by the assured of the fact that he had heard that a vessel like his was taken. 2 P. Wms. 170. And in a case where the assured had information of "a violent storm" about eleven hours after his vessel had sailed, and had stated only that "there had been blowing weather and severe storms on the coast after the vessel had sailed" but without any reference to the particular storm it was decided that this was a concealment, which vitiated the policy. 2 Caines R. 57. Vide 1 Marsh. Ins: 468; Park, Ins. 276; 14 East, R. 494; 1 John. R. 522; 2 Cowen, 56; 1 Caines, 276; 3 Wash. C. C. Rep. 138; 2 Gallis. 353; 12 John. 128.
5. Fraudulent concealment avoids the contract. See, generally, Verpl. on Contr. passim; Bouv. Inst. Index, h.t.; Marsh. Ins. B. 1, c. 9; 1 Bell's Com. B. 2, pt. 3, c. 15 s. 3, Sec. 1; 1 M. & S. 517; 2 Marsh. R. 336.