§ 7.1.4

• Jurisdiction: Arizona

§ 7.1.4 Negligent Nondisclosure

Just as common-law fraud embraces liability for nondisclosure, so too does the law of negligence.²⁰³⁷ If the defendant has a duty to speak, negligence in failing to reveal a fact may create liability.²⁰³⁸ A defendant's negligence in gathering information needed to speak accurately may result in liability.²⁰³⁹ Thus, if "a defendant discloses some facts, but negligently omits others, that defendant is liable if its disclosures create a misleading or false impression."²⁰⁴⁰

Whether negligent nondisclosure is actionable turns on the existence of a duty to speak.²⁰⁴¹ This duty, when it exists, operates as a brake on overreaching and dishonesty. Its existence depends on the relationship between the parties and the obligations arising out of that relationship,²⁰⁴² as well as judicial perceptions of fair dealing.²⁰⁴³

The courts look to § 551 of the Second Restatement of Torts to determine when a disclosure duty exists.²⁰⁴⁴ Under that section, a duty to disclose may exist (1) to prevent a partial or ambiguous statement from being misleading, (2) to prevent a previous statement from being misleading, (3) to correct a basic fact about which one party knows the other is mistaken,²⁰⁴⁵ (4) to require disclosure of a fact the other person is entitled to know because of a fiduciary relationship or a relationship of trust and confidence, or (5) to correct a false statement that was not intended to induce reliance, but upon which the speaker later learns the other is about to rely. A duty to disclose may also exist by statute²⁰⁴⁶ and may arise when one party inquires about specific information.²⁰⁴⁷

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Notes:

^[2037] See Wells Fargo Bank v. Ariz. Laborers, Teamsters & Cement Masons Local No. 395 Pension Trust Fund, 201 Ariz. 474, 483-84 ¶¶ 18-20, 38 P.3d 12, 21-22 (2002); S Dev. Co. v. Pima Capital Mgmt. Co., 201 Ariz. 10, 13 ¶ 1, 31 P.3d 123, 126...