ART.

1339
Failure to disclose facts, when there is a duty to reveal them, as when the parties are bound
by confidential relations, constitutes fraud.
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Fraud by concealment.
Fraud means crime of using dishonest methods to take something valuable from another
person. (Merriam Webster)
A neglect or failure to communicate that which a party to a contract knows and ought to
communicate constitutes concealment. In this case, concealment is equivalent to
misrepresentation. The concealment contemplated in Article 1339 presupposes a purpose or
design to hide facts which the other party ought to know.
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Example:
Xian and Yohan are partners engaged in the real estate business. Xian learned that Carlo was
interested in buying a certain parcel of land owned by the partnership even for a high price.
Without informing Yohan, Xian was able to make Yohan sell to him (Xian) his (Johan’s) share
in the partnership. Then, Xian sold the land at a big profit.
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ART. 1340
The usual exaggerations in trade, when the other party had an opportunity to know the
facts, are not in themselves fraudulent.
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Usual exaggerations in trade
It is the natural tendency for merchants and traders to resort to exaggerations in their
attempt to make a sale at the highest price possible. When the person dealing with them had
an opportunity to know the facts, the usual exaggerations in trade are not in themselves
fraudulent.
In effect, the law does not consider such exaggerations, even if known as false by the party
making them, as amounting to fraud that will affect the validity of a contract.
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Examples:
Expressions or advertisements like:
“The cigarette that will give you utmost smoking pleasure”
“You like it, it likes you”
“The refreshment of friendship”
“Do you want your child to get high grades? Then, buy him X
fountain pen.”
“First in quality” “The best in its class.’’