Legal Definitions - nondisclosure

Nondisclosure refers to the act of failing or refusing to reveal information that a person has a duty to disclose, or that would reasonably be expected to be shared in a particular situation.

This concept is distinct from a Nondisclosure Agreement (NDA), which is a specific type of contract where parties formally agree not to share confidential information.

• Example 1: Real Estate Transaction

  Imagine a homeowner selling their property who is aware of significant water damage in the basement that they have attempted to cover up with fresh paint. During the sale process, they do not mention this issue to potential buyers, even when asked about the property's condition.

  How it illustrates nondisclosure: In many jurisdictions, sellers have a legal obligation to disclose known material defects that could affect the property's value or desirability. By failing to reveal the water damage, the seller is engaging in nondisclosure, potentially misleading the buyer and violating their legal duty.

• Example 2: Insurance Application

  A person applying for health insurance has been diagnosed with a chronic illness but deliberately omits this information from their application form, which specifically asks about pre-existing medical conditions.

  How it illustrates nondisclosure: Insurance companies rely on applicants to provide complete and accurate information to assess risk and determine policy terms. The applicant's failure to disclose their chronic illness is a clear instance of nondisclosure, as they withheld information that was explicitly requested and material to the insurance company's decision.

• Example 3: Corporate Governance

  A senior executive at a publicly traded company becomes aware of a significant financial misstatement in the company's quarterly earnings report before it is released to the public. Despite their fiduciary duty to the company and its shareholders, they choose not to report this error to the board of directors or the auditing committee.

  How it illustrates nondisclosure: Corporate executives often have legal and ethical duties to disclose material information that could impact the company's financial health or stock price. The executive's failure to reveal the financial misstatement, especially given their position and responsibilities, constitutes nondisclosure and could have serious legal consequences.