Active Concealment Laws

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 What Does Concealment Mean in Law?

In the law, concealment is the act of unintentionally or intentionally not revealing information that should have been disclosed and would otherwise affect the creation or terms of a contract. Concealment may occur by withholding of material facts or by purposeful misrepresentation.

What Is Active Concealment?

Under contract laws, one of the parties typically has a duty to disclose information to the other party. Active concealment arises when one of the parties conceals that information that they have a duty to disclose.

This concealment may occur in different ways, including spoken words, actions, or writings. Active concealment is more than simply a failure to disclose private information. It involves a positive act that is intended to conceal the information.

For example, in certain financial transactions, a party may have a duty to disclose their tax information. Active concealment may arise if one of the parties goes out of the way to obstruct the other party’s access to that information or to hide that information.

One common example of this is when a party purposely alters their tax statements in order to conceal their assets. Active concealment is also different from passive concealment.

Passive concealment occurs when one of the parties remains silent when they have a duty to disclose information. The difference is with active concealment. The party had to take an affirmative step to conceal the information before they were held liable.

How Does Active Concealment Affect a Contract?

If a contract was formed under conditions that involved an active concealment, it can render that agreement voidable or void. All of the parties to a contract must consent to it in order for it to be a valid contract.

If there is information that was actively concealed by one of the parties, it is difficult to say whether or not the contract was actually consented to. In addition, it may be difficult to tell whether consent would have been provided without the active concealment.

Because of this, courts will often invalidate these types of contracts. The contract may be completely voided, and the non-breaching party may recover damages for their losses.

Or, if a court deems it appropriate, it may allow the parties to rewrite their contract to include the relevant information. A party who is held liable for active concealment may be subject to civil penalties. This includes paying for the losses of the other party, or they may be required to pay fines.

An individual may also face criminal penalties if it can be shown that the active concealment was motivated by malicious or criminal intent.

Is Active Concealment Applicable in Other Legal Situations?

Active concealment typically applies in situations where one party has a duty to disclose information to the other party. For example, active concealment commonly arises in real estate transactions.

In residential property sales, sellers often have a duty to disclose dangerous conditions or defects to buyers. They can breach this duty through active concealment, for example, if the seller plastered over defective pipes to conceal the condition.

Active concealment in real estate transactions may also affect other rights. For example, sellers are usually protected from liability under the doctrine of caveat emptor, meaning, let the buyer beware.

This doctrine places the risks on the buyer, who has to purchase the property as is. The buyer, in some cases, may not recover from the seller for any latent defects that would render the property unfit.

Caveat emptor, however, does not apply where a seller has actively concealed a defect from the buyer. In that type of case, a seller would be responsible for the costs of repairing any defects that were actively concealed.

What Is the Difference Between Active Concealment and Fraudulent Concealment?

Active concealment, as noted above, is the failure to disclose based on actions or words in a situation where there is a duty for an individual to disclose information. Fraudulent concealment arises when an individual conceals something with the intent to defraud or deceive the other party.

What Is Fraudulent Concealment?

Fraudulent concealment is the intentional act of failing to disclose facts or concealing facts that are relevant to a transaction in order to mislead or defraud another individual. This type of concealment is fraudulent because it aims to acquire an unfair advantage or hurt the other party.

Fraudulent concealment is common in commercial transactions, real estate deals, and insurance claims. For example, fraudulent concealment may arise when a seller willfully fails to disclose a flaw in a property that they are selling.

If an insurance firm hides information regarding a policyholder’s previous claims history on purpose, it would also be considered fraudulent concealment. Depending on the seriousness of the case, fraudulent concealment may result in legal implications, such as criminal penalties or civil lawsuits.

How Do I Prove a Fraudulent Concealment Claim?

There are several elements that must be proved to substantiate a false concealment claim, including:

  • Important information was hidden: The plaintiff must demonstrate that the respondent concealed material and relevant information about the transaction;
  • Intent to deceive: The plaintiff is required to demonstrate that the defendant intended to mislead or deceive them as well as that the concealment was engaged in to acquire an unfair advantage or to cause injury;
  • Reasonable reliance: The plaintiff is required to demonstrate that they relied on the information that was hidden and that their reliance was reasonable in light of the circumstances; and
  • Injury or loss: The plaintiff is required to demonstrate that the concealment caused injury or loss.

Establishing a false concealment claim may be difficult and may require extensive research as well as evidence presentation. This type of claim may also require the services of an attorney with expertise in these types of cases.

Are There Any Defenses to Fraudulent Concealment Claims?

There are several defenses an individual may be able to assert in a fraudulent concealment case, including:

  • Lack of material information: The defendant may claim that the information they withheld was not relevant or was not important to the transaction, meaning they were not required to reveal it;
  • No intent to mislead: The defendant may claim that they did not intend to deceive the plaintiff and that the concealment was done inadvertently or because of a lack of information;
  • No reliance: The defendant may claim that the plaintiff did not depend on the information that was hidden and that the concealment did not cause the plaintiff’s injury;
  • Statute of limitations: The defendant may claim that the plaintiff’s claim is prohibited by the applicable statute of limitations or time restriction for filing the legal action;
  • Contributory negligence: The defendant may claim that the plaintiff was also negligent and that their carelessness contributed to their injury; or
  • Release or waiver: The defendant may argue that the plaintiff waived or relinquished their right to file a claim for fraudulent concealment by signing a waiver or release agreement.

Do I Need a Lawyer for Active Concealment Claims?

Active concealment is prohibited by contract laws. If you believe you are in a contract that was formed under conditions of active concealment, you may be entitled to legal recourse.

The laws that govern contacts can vary by region, so it is important to consult with a contract lawyer for more information. Your attorney will be able to assist you in filing a claim for active concealment and help you obtain compensation for your losses.

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