Question 1

What am I legally required to disclose in a contract?

Accepted Answer

It depends on the type of contract and jurisdiction. Real estate sellers must disclose known defects in most states. Business sellers must disclose material liabilities. Employers must disclose certain terms of employment. Securities law requires extensive financial disclosure. When in doubt, err on the side of disclosing — hiding material facts can turn a simple breach into a fraud claim.

Question 2

What happens if I fail to disclose something material?

Accepted Answer

The other party can void the contract, sue for damages, or both. If the failure to disclose was intentional, it's fraud — which can lead to punitive damages and criminal liability. Even unintentional non-disclosure of material facts can be grounds for rescission (canceling the contract and unwinding the transaction).

Question 3

What's the difference between disclosure and representation?

Accepted Answer

A disclosure is sharing information — 'here's what you should know.' A representation is a statement of fact in the contract — 'we represent that there are no pending lawsuits.' Disclosures inform; representations create contractual obligations. A false representation is a breach of contract. A failed disclosure can be fraud.

Question 4

Can a contract require more disclosure than the law requires?

Accepted Answer

Absolutely. Contracts can (and should) set disclosure requirements beyond legal minimums. A consulting agreement might require disclosure of any competing engagements. A partnership agreement might require disclosure of personal financial situations. Contractual disclosure obligations are enforceable like any other contract term.

Question 5

How do I protect myself with proper disclosure?

Accepted Answer

Disclose in writing. Keep copies. Be specific — 'the roof leaks when it rains heavily' is better than 'the property has some issues.' If you're the one receiving disclosures, ask pointed questions and document the answers. Create a disclosure schedule (a list attached to the contract) for major transactions.

Disclosure

Definition

In Practice

Common in these contract types

Related terms

Frequently asked questions about disclosure

Create a contract with proper disclosure clauses