The unlawful suppression of any fact or circumstance by one of the partys to a contract from the other, which in justice ought to be made known.
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 sp as to induce him to forego inquiry into a matter upon which the other party has information, although such information be not exclusively within his reach. The party is not bound, however, to disclose patent defects.
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. The rule with regard to personalty is different.
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. 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. 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.
Fraudulent concealment avoids the contract.
This entry contains material from Bouvier's Legal Dictionary, a work published in the 1850's.
Courtesy of the 'Lectric Law Library