Legal Definitions - concealment

In legal terms, concealment refers to the act of intentionally or unintentionally failing to disclose important information that one has a duty to reveal. This undisclosed information, often called a "material fact," is something that would significantly influence a decision, such as whether to enter into a contract, assess a risk, or make an informed judgment. When a party conceals material facts, it can undermine the fairness and validity of an agreement or transaction, potentially leading to its cancellation or other legal consequences.

Concealment can manifest in various ways:

• Active Concealment: This involves taking specific actions or making statements that hide, obscure, or prevent the discovery of a material fact, rather than just remaining silent.
• Passive Concealment: This occurs when a party simply remains silent about a material fact, even though they have a legal or ethical obligation to speak up and disclose it.
• Fraudulent Concealment: This is a type of concealment where the party intentionally hides information with the specific purpose of deceiving or misleading another party for personal gain or to cause harm.

Here are some examples illustrating concealment:

• Example 1: Real Estate Transaction

  A homeowner is selling their house and knows that the roof has a significant, recurring leak that they've temporarily patched up. During negotiations with a potential buyer, the buyer specifically asks about the condition of the roof, and the seller states, "The roof is in good shape," without mentioning the leak or the temporary repair.

  This is an example of active concealment because the seller not only failed to disclose a material defect (the leak) but also made a misleading statement ("The roof is in good shape") that actively hid the true condition. The undisclosed information about the leak is a material fact that would significantly influence the buyer's decision to purchase the house and the price they would offer.

• Example 2: Insurance Application

  When applying for car insurance, an individual is asked about their driving history, including any accidents or traffic violations. They intentionally omit mentioning a recent serious speeding ticket and a minor fender bender that was their fault, believing it will result in a lower premium.

  This constitutes fraudulent concealment. The applicant deliberately withheld material facts (the speeding ticket and accident) that directly impact the insurer's assessment of risk and the premium they would charge. The intent here is to deceive the insurance company for financial benefit.

• Example 3: Business Partnership

  Two individuals are forming a business partnership. One partner knows that a key piece of equipment essential for their joint venture is faulty and will require expensive repairs soon, but they remain silent about this fact during discussions about capital contributions and operational costs.

  This is an instance of passive concealment. The partner had a duty to disclose the known material fact about the faulty equipment, as it would significantly affect the other partner's financial commitment and understanding of the business's immediate future expenses. By remaining silent, they concealed crucial information.