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Silence With Regard to a Material Fact
Last updated: 21-Jun-2015

In Smith v Hughes [1871] 6 QB 597, Cockburn CJ cites in his judgment an extract from Story on Contracts, with which he entirely agreed:

Mr. Justice Story, in his work on Contracts (vol. i. s. 516), states the law as to concealment as follows: - ‘The general rule, both of law and equity, in respect to concealment, is that mere silence with regard to a material fact, which there is no legal obligation to divulge, will not avoid a contract, although it operate as an injury to the party from whom it is concealed.’ ‘Thus,’ he goes on to say (s. 517), ‘although a vendor is bound to employ no artifice or disguise for the purpose of concealing defects in the article sold, since that would amount to a positive fraud on the vendee; yet, under the general doctrine of caveat emptor, he is not, ordinarily, bound to disclose every defect of which he may be cognizant, although his silence may operate virtually to deceive the vendee.’ ‘But,’ he continues (s. 518), ‘an improper concealment or suppression of a material fact, which the party concealing is legally bound to disclose, and of which the other party has a legal right to insist that he shall be informed, is fraudulent, and will invalidate a contract.’ Further, distinguishing between extrinsic circumstances affecting the value of the subject-matter of a sale, and the concealment of intrinsic circumstances appertaining to its nature, character, and condition, he points out (s. 519), that with reference to the latter, the rule is ‘that mere silence as to anything which the other party might by proper diligence have discovered, and which is open to his examination, is not fraudulent, unless a special trust or confidence exist between the parties, or be implied from the circumstances of the case.’ In the doctrine thus laid down I entirely agree.

Davies v London and Provincial Marine Insurance Co. (1878) L.R. 8 Ch. D. 469:

Where parties are contracting with one another, each may, unless there be a duty to disclose, observe silence even in regard to facts which he believes would be operative upon the mind of the other; and it rests upon those who say that there was a duty to disclose, to shew that the duty existed.


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