Article 1339. Failure to disclose facts, when there is a duty to reveal them, as when the parties are bound by confidential relations, constitutes fraud.
Artikulo 1339. Sa pagkabigo na maihayag ang katotohanan, kapag may tungkulin na ibunyag ito, kung ang bawat partido ay nakatali sa pinagkakatiwalaang relasyon, ay nagkasala ng panloloko.
FRAUD BY CONCEALMENT
A neglect or failure to communicate that which a party to a contract knows and ought to communicate constitutes concealment. In this case, concealment is equivalent to misrepresentation. Silence or concealment by itself does not constitute fraud. The concealment contemplated in Article 1339 presupposes a purpose or design to hide facts which the other party ought to know.
The injured party is entitled to cancel or annul a contract whether the failure to disclose the material facts is intentional or unintentional as long as there is a duty to reveal or disclose them or according to good faith such disclosure should be made and the other party is misled or deceived in entering into the contract. If the failure is unintentional, the basis of the action for annulment is not fraud but mistake or error; if unintentional and there is no duty to make the disclosure, the parties are bound by their contract.
EXAMPLE
Xian and Yanee are partners engaged in the real estate business. Here, the parties are bound by confidential relations. Xian learned that Carlo was interested in buying a certain parcel of land owned by the partnership even for a high price. Without informing Yanee, Xian was able to make Yanee sell to him (Xian) his (Yanee’s) share in the partnership. Then, Xian sold the land at a big profit.
In this case, Xian is guilty of fraudulent concealment because he was under the duty to make disclosure of facts having a bearing on the value of the interests of Yanee in the partnership which were not known to Yanee.
If the sale was at the initiative of Yanee, and Xian unintentionally failed to inform Yanee of Carlos’s offer, the cause for annulment is mistake or error on the part of Yanee.
OBLIGATIONS AND CONTRACTS 