Legal Definitions - U.

Uberrimae Fidei is a Latin phrase meaning "of the utmost good faith." In legal contexts, it refers to a class of contracts or relationships where one party has a legal obligation to act with absolute honesty and to disclose all material facts, even if not specifically asked. This duty goes beyond the typical requirement for good faith in contracts, demanding a higher standard of transparency and candor due to the inherent imbalance of information or trust between the parties.

• Example 1: Application for a Health Insurance Policy

  Scenario: A person applies for a new health insurance policy. The application form asks about their medical history, including any past diagnoses, treatments, or chronic conditions.

  Illustration: The contract between the applicant and the health insurance company is considered one of uberrimae fidei. The applicant has a duty to disclose all known relevant health information, even if they believe certain details are minor or might lead to a higher premium. For instance, failing to disclose a recent diagnosis of a serious illness, like diabetes or a heart condition, would be a breach of this duty of utmost good faith. If the insurance company later discovers such a material non-disclosure, it could have grounds to void the policy or deny future claims, as the company relied on the applicant's full and honest disclosure to assess the risk.

• Example 2: Fiduciary Relationship of a Financial Advisor

  Scenario: A client hires a financial advisor to manage their investment portfolio and provide retirement planning advice.

  Illustration: The relationship between a financial advisor and their client often operates under the principle of uberrimae fidei, especially if the advisor acts as a fiduciary. The advisor has a legal and ethical obligation to act solely in the client's best interests, to disclose all potential conflicts of interest (e.g., if they receive a commission for recommending a particular product), and to provide transparent information about fees, risks, and investment performance. If the advisor secretly invests the client's money in a high-risk venture that primarily benefits the advisor, without the client's informed consent, they would be violating their duty of utmost good faith.

• Example 3: Formation of a Partnership Agreement

  Scenario: Two individuals are forming a business partnership to open a new restaurant. They are drafting the partnership agreement and discussing their respective contributions and responsibilities.

  Illustration: While not always explicitly stated, the formation of a partnership often implies a duty of uberrimae fidei between the prospective partners. Each partner is expected to disclose all material information relevant to the partnership's success and their own ability to contribute. For example, if one partner knows they have a significant personal debt that could jeopardize their financial contribution to the business, or if they have a non-compete clause from a previous employer that would prevent them from fully participating, they have a duty to disclose this information to the other partner. Concealing such facts would breach the expectation of utmost good faith required for a trusting and successful partnership.