Active Concealment Laws

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What Is Active Concealment?

In a contracts setting, one of the parties often has a duty to disclose information to the other party. Active concealment refers to the situation where a party conceals any information which they have a duty to disclose. The concealment may occur through actions, writings, or spoken words. This is more than simply a failure to disclose private information- active concealment involves a positive act intended to conceal the information.

For example, in some financial transactions a party may have the duty to disclose their tax information. Active concealment may occur if the party goes out of their way to hide information or obstruct the other party’s access to it. A common example of this is where a party purposely alters tax statements to conceal the existence of assets.

Active concealment is different from passive concealment. Passive concealment happens when a party simply remains silent when they have a duty to disclose information. The difference here is that in active concealment, the party must take affirmative steps to conceal the information before they are held liable.

How Does Active Concealment affect a Contract?

If a contract was formed under conditions involving active concealment, it may render the agreement void or voidable. All parties must consent to a contract in order for it to be valid. If information has been actively concealed by one party, it is difficult to say whether the contract was actually consented to. Likewise, it can be difficult to tell whether consent would have been given without the active concealment. 

For this reason a court will often invalidate such a contract. The contract might be completed voided, with the non-breaching party recovering damages for their losses. Or, if it is deemed appropriate, a judge may allow the parties to rewrite the contract to include the relevant information. 

Furthermore, a party that is held liable for active concealment may become subject to civil penalties such paying for the other parties losses, or they may be required to pay fines. Criminal penalties may also result if it can be proven that the active concealment was motivated by a criminal or malicious intent. 

Is Active Concealment Applicable in other Legal Situations?

Active concealment generally applies in most situations where one party has a duty to disclose information to the other party. For example, active concealment is common in real estate transactions. In a residential property sale, the seller often has a duty to disclose dangerous conditions or defects to the buyer. This duty can be breached through active concealment, such as when the seller plasters over defective pipes to conceal the condition.      

Active concealment in a real estate transaction may also affect other rights as well.  For example, a seller is usually protected from liability through the doctrine of “caveat emptor”, which means “let the buyer beware”. This doctrine places the risk on the buyer, who must purchase the property “as is”. The buyer sometimes may not recover from the seller for any latent defects that would render the property unfit.  

However, caveat emptor does not apply where the seller has actively concealed any defects from the seller. Thus, the seller would be responsible for the costs of repairing any defects that were actively concealed.

Do I Need a Lawyer for Active Concealment Claims?

Active concealment is prohibited under contract laws. If your contract has been formed under conditions of active concealment, you may be entitled to recourse in a court of law. The laws governing contracts may vary by region, so it is highly recommended that you contact a lawyer for advice or consultation. Your attorney will be able to assist you in filing a claim for active concealment.

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Last Modified: 07-07-2015 03:39 PM PDT

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