Fraudulent Concealment in California: When Staying Silent Is Fraud

Last updated: November 2026. Reviewed by Pavel Kolmogorov, California business litigation attorney (State Bar No. 321018).

Fraud by concealment is the intentional suppression of a material fact by someone who had a duty to disclose it. Silence alone is not fraud in California. Silence by a party bound to speak is. A seller who knew the business's biggest customer had given notice, and who answered your diligence questions without mentioning it, likely had that duty under Civil Code section 1710, subdivision 3. Kolmogorov Law, P.C. handles concealment claims for buyers, partners, and sellers in Orange County, Los Angeles, and across California.

Call (909) 235-6116 or contact us online to discuss a fact that was kept from you, or a nondisclosure claim made against you.

The elements of fraud by concealment in California

The Civil Code lists four kinds of deceit. The third is the suppression of a fact by one who is bound to disclose it, or who gives information of other facts that are likely to mislead for want of communication of that fact. (Civ. Code, § 1710, subd. (3).)

The California Supreme Court listed five elements in 2024 in the Rattagan decision discussed below, and juries are instructed on the claim through CACI No. 1901. There must be concealment or suppression of a material fact, by a defendant with a duty to disclose it, who intended to defraud by concealing it. The plaintiff must have been unaware of the fact and would have acted differently had it been known. And the plaintiff must have been damaged as a result.

Most of the fighting is over the second element.

When a duty to disclose exists

Parties dealing at arm's length do not owe each other a running commentary. A duty to speak has to come from somewhere, and California courts recognize a short list of sources.

A statute can impose it. A fiduciary or other confidential relationship can, which is the territory of constructive fraud between partners and co-owners.

Three more situations matter most in ordinary deals. The first is exclusive knowledge: the defendant knows material facts that the plaintiff does not know and cannot reasonably discover. The second is the half-truth, where the defendant says something accurate but leaves out facts that materially qualify it. The third is active concealment, where the defendant takes steps to keep the plaintiff from finding out.

Those three presuppose a relationship between the parties in which a duty can arise, and that relationship comes from some transaction between them. (LiMandri v. Judkins (1997) 52 Cal.App.4th 326, 336-337.) Buyer and seller qualify. So do parties entering a contract. A stranger to the deal usually does not.

How concealment shows up in business deals

The sale with a departing customer. A seller hands over a customer list and trailing revenue. Both are accurate. The seller does not mention that the largest account sent a termination notice the month before. Accurate numbers that omit the notice are a half-truth.

The partner with a private offer. One co-owner receives an inquiry from a buyer for the whole company. He says nothing, then buys out his partner at a lower valuation. A fiduciary relationship supplies the duty.

The supplier with a discontinued part. A vendor signs a three-year supply agreement while knowing its own manufacturer will stop making the component within months. Whether that is concealment or merely a bad bargain depends on what the buyer could have discovered, what it asked, and what the vendor said in response.

I ask every client in these cases the same first question: what did you ask, and what were you told? The answer usually shows which duty theory fits.

"As is" clauses, disclaimers, and non-reliance language

Sellers often point to the contract. It says the buyer investigated for itself, took the business "as is," or relied on nothing outside the document.

Those clauses matter, but they are not a license to hide things. Contracts that have for their object, directly or indirectly, to exempt anyone from responsibility for their own fraud are against the policy of the law. (Civ. Code, § 1668.) In real estate cases, courts have read an "as is" term to mean the buyer takes the property in the condition it could see or observe. The term has not protected a seller who hid known facts beyond the buyer's reach. Buyers of businesses make the same argument.

Still, the buyer's sophistication and the detail of the disclaimer affect whether reliance was reasonable. A specific written disclosure of the very fact at issue usually ends the claim. Our page on breach of a business purchase agreement covers the contract remedies that run alongside.

Concealment during a contract, not only before it

Concealment claims are not limited to the negotiating table. A party may be liable for concealing facts during performance, if the elements can be established independently of the contract and the concealment exposed the other side to a risk beyond what the parties reasonably contemplated when they signed. (Rattagan v. Uber Technologies, Inc. (2024) 17 Cal.5th 1.) Risks the agreement itself allocated generally stay in contract. Our economic loss rule page explains how courts apply that holding.

Remedies and the deadline

A plaintiff who proves concealment may recover the losses it caused, and the measure depends on the kind of transaction; see our page on fraud damages. Rescission is an alternative where unwinding the deal is still practical.

The limitations period is three years, and the claim does not accrue until the aggrieved party discovers the facts constituting the fraud. (Code Civ. Proc., § 338, subd. (d).) Courts treat discovery as including what a reasonable investigation would have revealed once the plaintiff had reason to suspect fraud. Concealment cases often turn on that discovery date, which our fraud statute of limitations page addresses.

If you are accused of concealing a fact

Start with duty. Was there a fiduciary relationship, or was this an arm's-length sale? Was the fact in the data room, a public filing, or a document the other side signed for? A fact the plaintiff could reasonably have discovered is not one you had exclusive knowledge of.

Then intent. The claim requires that the fact was suppressed with intent to defraud. An oversight in a large diligence production is different from a decision to leave something out, and the emails from the weeks before closing usually show which it was.

Finally, materiality and causation. If the plaintiff would have closed anyway on the same terms, the claim fails. Many of these claims are narrowed at the pleading stage.

What to bring to the first meeting

The purchase agreement, disclosure schedules, and any side letters.
Diligence requests and the written responses to them.
The document or event that revealed the hidden fact, with its date.
Emails and messages from the negotiation period.
Financial records showing what the concealment cost.

Frequently asked questions

The seller of the business never told us its biggest customer had already given notice. Is staying silent fraud in California?

It can be. California treats silence as fraud when the silent party had a duty to disclose. A seller who supplied customer and revenue information while leaving out a known termination notice gave a half-truth, and a seller with exclusive knowledge of a material fact may also be bound to speak. You would still need to show intent, reliance, and loss.

What are the elements of fraudulent concealment in California?

Five. The defendant concealed or suppressed a material fact. The defendant had a duty to disclose it. The defendant intended to defraud by concealing it. The plaintiff was unaware of the fact and would have acted differently if it had been known. And the plaintiff was damaged as a result. The statutory source is Civil Code section 1710, subdivision 3.

Is there a duty to disclose in an arm's-length business deal?

Not a general one. California does not require a negotiating party to volunteer everything it knows. A duty arises from a statute, a fiduciary or confidential relationship, exclusive knowledge of material facts the other side cannot reasonably discover, partial statements that mislead by omission, or active steps to hide a fact from the other party.

Our purchase agreement says we bought the company as is. Can we still sue for facts the seller hid?

Often, yes. Under Civil Code section 1668, a California contract cannot exempt a party from responsibility for its own fraud, so an "as is" or non-reliance clause does not automatically defeat a concealment claim. The clause still matters as evidence of what you reasonably relied on, particularly if the agreement specifically disclosed the fact you say was hidden.

What is the difference between concealment and misrepresentation?

A misrepresentation is a false statement. Concealment is a failure to state a fact that the defendant was obligated to disclose. California lists both as forms of deceit in Civil Code section 1710. Concealment adds one element a misrepresentation claim lacks, the duty to disclose, and that element is where most concealment cases are won or lost.

Talk to a California business fraud attorney

If a material fact was hidden from you in a deal, or you have been accused of hiding one, call (909) 235-6116 or contact us online. Kolmogorov Law, P.C. is located at 327 Magnet, Irvine, CA 92618, and represents businesses in Orange County, Los Angeles, and throughout California.

This page provides general information about California law and is not legal advice. Outcomes depend on the relationship, what was asked and disclosed, and the court.