28 October 2010
General principles of contract says while entering into a contract one is not supposed to disclose everything unless he is duty bound to speak. Eg : When a person selling a land he is not supposed to disclose everything about the land unless buyer asks. However, when he is duty bound to speak, and if he keeps quite it will be considered as misrepresentation or fraud ( depending upon the scenario). Contracts of insurance are considered to be contracts of utmost good faith and and law requires a person to speak i.e he is duty bound to disclose.
This phrase is used to express that a contract must be made in perfect good faith, concealing nothing; as in the case of insurance, the insured must observe the most perfect good faith towards the insurer.