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The term full disclosure in the legal sense often applies to laws that level the playing field between people who are entering into a contract. This leveling is important because it gives people an opportunity to make a reasoned decision on whether to enter a contract based on full knowledge of the situation. In some cases, violating full disclosure laws, where they exist, can either void the contract or create difficult circumstances. This type of law most applies to the world of real estate and to laws relating to marriage and prenuptial agreements.
Full disclosure laws in real estate vary by region but they’re meant to protect buyers from purchasing property that may have real, but unknown flaws. When a seller gets ready to sell a house, he must list all known defects of the home. For example, it might be the case that part of the home was rebuilt without appropriate building permits and is considered an illegal remodel. This decreases the home’s value, and the current owner must tell any interested buyers or he faces serious consequences.
Instead of voiding the purchase, when a home is sold without full disclosure, what usually occurs is that the former owner must give back whatever money is necessary to repair any undisclosed features. The statute of limitations on disclosure may vary, but they can sometimes be lengthy, which means a discovered defect might result in the owner having to pay back part of the home’s cost years’ later. To avoid this scenario, most people use home inspectors, and both buyer and seller may each employ an inspector to try to make certain all details about the property are disclosed in advance, and a fair price is reached based on those details.
Disclosure laws may also apply to the signing of different contracts, and one type that is particularly affected by them is the prenuptial agreement. These laws may be strictly about couples sharing all details on their financial lives, but they can be much wider in scope. Failure to disclose various parts of history or information about past relationships might be impetus to void the marriage contract and abandon claim to any divorce settlement, as stated in the prenuptial agreement. Marriage contracts can be subject to some disclosure laws. People seeking secular annulments instead of divorces may seek them on the basis that a person lied or failed to disclose something serious.
There are other forms of full disclosure guidelines or laws. Celebrities endorsing a product may have to disclose that they are being paid for their services. Writers occasionally have to explain their specific interests, such as financial or political relationships, if they cover certain topics. Full disclosure can also refer to Internet companies that publish to their clients a list of issues that may affect security. In most cases, it means revealing all that is known so a person enters the relationship with full knowledge of what that entry entails.
It's important to note that disclosure laws have no bearing on minors. There was a plot twist in a movie once in which a prenuptial agreement was found invalid because the wife did not disclose that she was a minor before entering into it.
That was all Hollywood magic, of course, but it's accurate. Fair result? Probably not, but minors stand as a protected class and the law prefers to let them get away with certain things that adults are not.
And this is one of the laws that can be a trap for real estate agents. Why? Disclosure laws frequently extend to them and not just their clients. For example, let's say Joan wants to sell her house. She tells her agent, Bob, that it has a major foundation problem but orders him not to disclose that fact.
This creates a problem for Bob. He must be loyal to his client but, as a real estate agent, he is obliged to pass on whatever information he has about flaws in the home to prospective buyers. If he fails to do that, his actions would violate the laws in some states.
Clearly, the temptation is always there for real estate agents not to disclose when their clients order them not to do so. That's a trap, however. Even if an agent is legally in the clear, there are ethical considerations that come into play.
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