Davies v London Provincial Marine Insurance Co [1878]
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Davies v London Provincial Marine Insurance Co [1878] 8 Ch D 469 is an English contract law case that concerned the duty to disclose.
Two senior officials of the Insurance Company believed that the retention of money by one of their agents constituted a criminal offence, and they instructed his arrest. The agent's friends attempted to reach an arrangement with the officials, but their efforts were unsuccessful. Subsequently, the officials received advice stating that the agent's actions were not criminal, leading to the withdrawal of the arrest instructions.
Later on, during a meeting between the officials and the agent's friends, an agreement was reached regarding the alleged embezzlement. It was agreed that the agent would not be arrested before Tuesday, but there was no explicit clarification that he could not be arrested at all.
A day or two later, the agent's friends met with the officials again and arranged for £2,000 to be deposited with trustees for the security of the company. During this meeting, there was no mention of the withdrawal of the arrest instructions. The agent's friends sought to have the agreement set aside.
The court held that, generally, each party in a contract may observe silence unless there is a duty to disclose. Such a duty may arise in certain situations, including:
In this case, the court determined that the situation did not fall under contracts uberrimae fidei. However, the payment of money into the bank was induced by statements made during the initial meeting when there seemed to be both grounds and intention to prosecute. In the second interview, where these facts no longer existed, the officials continued to maintain the impression by discussing embezzlement. As a result, the court held that the contract should not be upheld.
Two senior officials of the Insurance Company believed that the retention of money by one of their agents constituted a criminal offence, and they instructed his arrest. The agent's friends attempted to reach an arrangement with the officials, but their efforts were unsuccessful. Subsequently, the officials received advice stating that the agent's actions were not criminal, leading to the withdrawal of the arrest instructions.
Later on, during a meeting between the officials and the agent's friends, an agreement was reached regarding the alleged embezzlement. It was agreed that the agent would not be arrested before Tuesday, but there was no explicit clarification that he could not be arrested at all.
A day or two later, the agent's friends met with the officials again and arranged for £2,000 to be deposited with trustees for the security of the company. During this meeting, there was no mention of the withdrawal of the arrest instructions. The agent's friends sought to have the agreement set aside.
The court held that, generally, each party in a contract may observe silence unless there is a duty to disclose. Such a duty may arise in certain situations, including:
- Where there is a pre-existing relationship between the parties, such as agent/principal, solicitor/client, or trustee/beneficiary.
- In contracts uberrimae fidei (of the utmost good faith), such as partnership and insurance contracts.
- In ordinary contracts to correct a previously false statement.
In this case, the court determined that the situation did not fall under contracts uberrimae fidei. However, the payment of money into the bank was induced by statements made during the initial meeting when there seemed to be both grounds and intention to prosecute. In the second interview, where these facts no longer existed, the officials continued to maintain the impression by discussing embezzlement. As a result, the court held that the contract should not be upheld.
