Disclosure Duties

No General Duty to Disclose

If one party to a contract makes a statement of fact or intent on which the other party relies to his detriment in entering the contract, then the contract may be set-aside or there may be a right of compensation. The misstatement or misrepresentation need not be intentional.  It may range from being deliberate, to careless, to entirely innocent, each of which has different consequences.

Generally, silence does not constitute misrepresentation. This is the general principle of “buyer beware”.  Where one party has superior knowledge relevant to the bargain being made, he need not disclose it to the other. There are exceptions to this rule, in certain areas, such as insurance contracts.


Duty of Good Faith

Many Continental jurisdictions require parties to a proposed contract, to negotiate in good faith. In some limited cases, a person has a duty to disclose.  There have been suggestions in some common law cases, that there should be a more general obligation on parties to proposed contracts to deal in good faith.

Circumstances can arise where persons are obliged to deal in good faith due to their relationship or the nature of their respective roles. A party who is in a fiduciary position relative to another, cannot take unfair advantage of that other.

Where a fiduciary relationship exists, a duty of disclosure will apply. If he may deal at all, the other party must be appraised of all relevant facts. There will be a requirement, at a minimum that the “weaker” party have independent legal or other sufficient advice.


Insurance Contracts

The best known and most thorough obligations to disclose arises in relation to insurance contracts. There is a general duty of good faith and disclosure on the insured in entering an insurance contracts. The duty of utmost good faith on the proposer of a policy requires that he disclose all matters relevant to the risk.

The duty of good faith is necessary in order to enable the insurer to assess, price and underwrite the relevant risk.  Any failure to be truthful or any failure to disclose material facts is likely to invalidate the policy. The duty extends to every material fact which ought to be known by the proposed insured.  If the disclosure is not made the insurer may avoid the contract.


Disclosure Required in Insurance Contracts

The proposed insured is generally obliged to disclose anything which is within his knowledge and which a reasonable and prudent insurer would regard as material to underwriting the risk. If the non-disclosure relates to a material fact, the state of mind or innocence of the insured may not be relevant.

The Irish Courts have been reluctant to hold policies void, where a party has acted honestly. The proposal form will require full disclosure. An honest response will usually suffice.

Materiality may be proved by the insurance company.  Ultimately the judge decides whether a fact is or is not material.  The fact must be such as to be relevant to the insurance or the premium level.


Silence Creates a False Impression

Silence does not generally constitute misrepresentation in itself. Where one party knows that the other is mistaken, he is not generally obliged to correct or inform him. In cases of unilateral mistake, the contract may be rescinded where one party knows the other has made a fundamental error or slip about the subject matter of the contract.

Silence may create a false impression in some contexts, such as where the mistake has been induced by the person concerned and the person does not correct it.   A person may give a partial explanation which although true of itself, it is misleading due to its incompleteness. In this context, there is in effect an active duty to give a complete and accurate account of the matter, to remove the misleading impression created.

Where a person makes a representation, he must make a full statement, not a partial or fragmentary account which is false or misleading in the overall context. There may be a false representation where silence distorts what has been asked or said.

A person is obliged to correct a false representation or impression, which he has himself created. This is so if the original statement would not have constituted a misrepresentation in the first place. Where a person makes a statement which he later discovered to be true, he must disclose the changed position. If a statement is made which is true at the time but later becomes untrue to the knowledge of the person making it, this must be disclosed.


Disclosure Required by Contract

Disclosure can always be required by the terms of the contract. A contract may create an obligation to make a full disclosure.

A contract for the sale of shares usually provides numerous specific warranties, often including a warranty to the effect that all material facts have been disclosed. The failure to disclose against warranties (to the extent that they are not fully accurate in relation to the company, will leave the seller liable for breach of contract.

In the context of the flotation of companies and the issue of shares, the law requires a prospectus, by which there is a positive obligation to fully disclose a wide range of information material to the value of the company’s shares.  Similarly, the listing rules create on-going obligations in respect of a range of matters relevant to share value.


Miscellaneous Duties

There are a number of miscellaneous circumstances, where the law requires one party with unique knowledge to disclose information. In the sale of real property context, latent defects in the seller’s title must be disclosed. This is contrasted to a patern or apparent defect on title which is eveident.

In the context of a guarantee, the creditor may be under a duty to disclose material facts affecting the risk. This is not a duty which applies genreally. It arise where the context is such that the guarantor is equivalent to an insurer.

A duty to  disclose may arise from custom or practice in the relevant trade. There may be a custom in a particular market, where the seller has special insights into what is sold, which are not known or knowable to buyers.

Statute and exchanage rules require extensive disclosure in the context of the issue and listing of shares and other securities in publicly quoted companies.


Consumer Contracts

In the context of consumer contracts, the Unfair Terms in Consumer Contracts Regulations bring in the continental law concept of the general duty of good faith in consumer contracts.  This reflects the European origin and trans-European application of the underlying Directive.

There are specific duties to disclose prior information where traders deal with consumers. They are dealt with in detail below.

There is also extensive legislation on unfair and aggressive commercial practices. They may in effect, require a greater level of disclosure in some circumstances, so as to ensure that the requirements are not breached.


Distance and Off Premises Consumer Contracts

The Electronic Commerce Act confirms that that contracts may be formed over the internet and by other electronic means. Modern EU derived consumer legislation makes extensive mandatory requirements in relation to what traders who deal with a consumer must provide in concluding a transaction.

Distance Selling (which is wider than internet sales) legislation requires extensive information to be provided pre-contract and confirmed post contract, in a durable form, commonly a pdf which can be saved. There are broadly similar requirements in relation to doorsteps contracts, and distance financial services.

A trader who concludes an off-premises contract with a consumer shall provide the consumer with a copy of the signed contract or with confirmation of the contract. The copy or confirmation of the contract shall be provided on paper or, if the consumer agrees, on another durable medium.

Where applicable, the copy or the confirmation of the contract provided by the trader shall include the confirmation of the consumer’s acknowledgement of the loss of the right to cancel the contract in the case of digital content not supplied on a tangible medium where the performance has begun with the consumer’s prior express consent.

A trader who contravenes a provision of this Regulation commits an offence.


Required Disclosure

The EU derived 2013 consumer protection regulations extend the written information disclosure requirements for distance and off premises sales.  The trader must provide the specified information both pre-contract and post contract. Before a consumer is bound by an off premises contract or offer, the trader must provide the specified information. Where there is a right to cancel the contract, the model form of cancellation certificate must be provided.

The required information is as follows:

  • the main characteristics of the goods or services to the extent appropriate to the medium and to the goods or services concerned;
  • the identity of the trader, including the trader’s trading name;
  • if the trader is acting on behalf of another, the geographical address and identity of that trader;
  • the geographical address at which the trader is established; the telephone number, fax and e-mail address where available, to enable the consumer to contact the trader quickly and communicate efficiently;
  • the geographical address of the place of business of the trader to which the consumer may address complaints, if different to the above;
  • where the trader acts on behalf of another, the place of business of that other, to which the consumer may address complaints;
  • the total price of the goods or services, inclusive of tax
  • where the nature of goods or service is such that the price cannot reasonably be calculated in advance, the manner in which the price is to be calculated;
  • where applicable, additional freight and postal charges and other costs; where those charges cannot reasonably be calculated in advance, the fact that such charges may be made;
  • in the case of contracts of indeterminate duration or containing a subscription, the total cost per billing method, where contracts are charged at a fixed rate, the total monthly costs or where the total cost cannot reasonably be calculated in advance, the manner in which the price is to be calculated;
  • cost of using the means of distance communication, used for conclusion of the contract, where this is other than at the basic rate;
  • arrangements for the payment, delivery, performance and time by which the trader undertakes to deliver the goods or perform the service;
  • where applicable, the trader’s complaint handling policy;
  • where a right to cancel exists, the conditions, time limit and procedures for exercising that right in accordance with the legislation;
  • where applicable, that the consumer will have to bear the cost of returning the goods in case of cancellation and in the case of distance contracts, if the goods by their nature cannot normally be returned by post, the cost of returning the goods;
  • where the consumer exercises the right to cancel after having made a request in accordance with the regulations, that the consumer is liable to pay the trader’s reasonable cost in accordance with the regulations;
  • where the right to cancel the contract does not apply under the regulations, confirmation that the consumer will not benefit from that right or where applicable, the circumstances in which the consumer loses that right;
  • in the case of a sales contract, the existence of a legal obligation on the trader to supply goods that are in conformity with the contract;
  • where applicable, the existence and conditions of customer assistance, after sale services and commercial guarantees;
  • the existence of relevant codes of practice as defined under the Consumer Protection Act and where applicable, how copies of such codes can be obtained;
  • the duration of the contract, where applicable or if the contract is of indeterminate duration or is to be extended automatically, the conditions for terminating it;
  • where applicable, the minimum duration of the consumer’s obligations under the contract;
  • where applicable, the existence and conditions of deposit or other financial guarantees to be paid or provided by the consumer at the request of the trader;
  • were applicable, the functionality including applicable technical protection measures of digital content;
  • where applicable, any relevant interoperability of digital content with hardware and software of which the trader is or can reasonably be expected to be aware;
  • where applicable, the possibility of having recourse to an out of court complaint and redress mechanism, to which the trader is subject and the methods for having access to it.

On Premises Consumer Contracts

An “on premises” contract is a contract, other than a distance contract or an off premises contract. The 2013 EU derived consumer protection regulations now require the provision of consumer information in relation to an “on premises” consumer contracts, as well as for doorstop, internet, and other distance contracts.

Traders must give information to the consumer before the consumer is bound by an on premises contract.  The information must be set out in a clear and comprehensible manner, unless the information is already apparent from the contract.

The information to be provided is as follows:

  • the main characteristics of the goods or services to the extent appropriate to the medium and to the goods or services
  • the identity of the trader, including the traders name and legal identity;
  • the geographical address at which the trader is established and the trader’s telephone number;
  • the total price of the goods or services inclusive of taxes
  • where the nature of goods or services is such that the price cannot be reasonably calculated in advance, the manner in which the price is to be calculated;
  • where applicable, all freight, delivery or postal charges additional to the price referred to above or where they cannot be reasonably calculated in advance, the fact that charges may be payable;
  • where applicable, the arrangements for payment, delivery, performance and the time by which the trader undertakes to deliver the goods or perform the service;
  • where applicable, the trader’s complaint handling policy;
  • in the case of a sales contract, the existence of a legal obligation on the trader to supply goods that are in conformity with the contract;
  • where applicable, the existence and conditions of after sale services and commercial guarantees;
  • the duration of the contract where applicable, or if the contract is of indeterminate duration or is to be extended automatically, the conditions for terminating it;
  • where applicable, the functionality including technical protection measures of digital content;
  • where applicable, any relevant interoperability of digital content with hardware or software, of which the trader is or can reasonably be expected to be aware.

The obligations are subject to a number of exceptions.  The requirement to provide information about the existence of a legal obligation on the trader to supply goods in conformity with the contract and other consumer rights, applies to a sales contract only.  Certain of the obligations apply, only where applicable.  For example, where the relevant such policies do not exist, the statements need not be provided.

If the information is apparent from the context, it need not be provided.  It may be available on packaging and signs etc. and this may suffice in many cases. The information obligation does not apply to contracts that involve day to day transactions and that are performed immediately, when the contract is made.  This will typically apply to purchases in shops, restaurants and other retail outlets.

Failure by the trader to comply with the obligations is an offence.  The regulatory authority may take civil or other action.


Consumer Finance

The lender in consumer loans, credit agreements, and credit sale agreements must set out certain matters, be signed and in writing. A similar provision applies to hire purchase and consumer hire agreements. There are requirements for prescribed warnings notification of rights and a so-called cooling off period. During the cooling off period, the contract may be cancelled. It is usually seven to ten days.

The agreement must contain certain information about the loan including the amount of credit, interest charged, repayment installments, the annual percentage rate of charge (APR) details of charges, the method of determining the total amount payable, the date of expiry of the loan and the cost of termination.

The Consumer Credit Act provides that the failure to comply with the required formalities makes the agreement unenforceable against the consumer unless the court is satisfied that the failure to comply was not deliberate and is not prejudice the consumer, and it would be just and equitable to dispense with the requirements. In this case, the court may permit the agreement to be enforced subject to conditions as it decides.


References and Sources

Irish Textbooks and Casebooks

Clark, R. Contract Law in Ireland 8th Ed. (2016) Ch. 11, 13

Friel, R. The Law of Contract 2nd Ed, (2000)

McDermott, P.  Contract Law (2001) 2nd Ed (2017) Ch. `13

Enright, M. Principles of Irish Contract Law (2007)

Clark and Clarke Contract Cases and Materials 4th Ed (2008)

English Textbooks and Casebooks

Poole, J. Casebook on contract law. (2014) 12th edition

Stone and Devenney, The Modern Law of Contract 10th Ed (2015)

McKendrick, Contract Law 10th Ed (2013)

Chen-Wishart, Contract Law 5th Ed (2015)

Anson, Reynell, Beatson, J., Burrows, Cartwright, Anson’s law of contract. 29th Ed (2010)

Atiyah and Smith, Atiyah’s introduction to the law of contract. 6th Ed.

Chen-Wishart, M. (2015) Contract law. 5th Ed.

Cheshire, Fifoot and Furmstons, Furmstons and Fifoot Cheshire, Fifoot and Furmston’s law of contract. OUP.

Duxbury, Robert (2011) Contract law. 2nd Ed.

Halson, Roger (2012) Contract law. 2nd Ed.

Koffman & Macdonald’s Law of Contract. 8th Ed. (2014)

O’Sullivan, Hilliard, The law of contract. 6th Ed. (2014)

Peel, and Treitel, The law of contract. 13th Ed. (2011).

Poole, J.Casebook on contract law. 12th Ed. (2014).

Poole, J.  Textbook on contract law. 12th Ed. (2014)

Richards, P Law of contract. 10th Ed. (2011)

Stone, R.  The Modern law of Contract. 10th Ed. (2013)

Treitel, G. H.  An outline of the law of contract. 6th Ed (2014).

Turner, C Unlocking contract law. 4th Ed. (2014).

Upex, R. V., Bennett, G Chuah, J, Davies, F. R. Davies on contract. 10th Ed. (2008).

UK Casebooks

Stone,Devenney, Text, Cases and Materials on Contract Law 3rd Ed (2014)

McKendrick, Contract Law Text, Cases and Materials 6th Ed (2014)

Stone, R, Devenney, J Cunnington, R Text, cases and materials on contract law. 3rd Ed (2014)

Burrows, A. S.  A Casebook on Contract. 4th Ed.

Beale, H. G., Bishop, W. D. and Furmston, M. P. Contract: cases and materials. 5th ed. (2008)

Blackstone’s Statutes on Contract, Tort & Restitution 2017 (Blackstone’s Statute Series)

UK Practitioners Texts

Chitty on Contracts 32nd Edition, 2 Volumes & Supplement (2016)

The above are not necessarily the latest edition.