Johnson v. Davis (Disclosure of Material Facts)
Brief Fact Summary. The Plaintiffs, the Davis’s (Plaintiffs), brought suit to rescind a contract to buy a property after they discovered the roof of the house leaked. The Defendants, the Johnson’s (Defendants), had represented that the roof was fine.
Synopsis of Rule of Law. When a seller of a home knows of facts materially affecting the value of the property, which are not readily observable and are not known to the buyer, the seller is under a duty to disclose them.
Facts. The Plaintiffs entered into a contract to buy a house for $310,000. The Defendants knew that the roof leaked, but affirmatively represented to the Plaintiffs there were no problems with the roof. After the Plaintiffs paid the deposit, they discovered water gushing into their new home after a heavy rain. The Plaintiffs brought this action for rescission of the contract. The trial court held that the affirmative representation that the roof was fine was a false representation entitling the Plaintiffs to rescission. The Defendants appealed.
Issue. Whether the seller had a duty to disclose a latent material defect.
Held. Affirmed. The Defendants fraudulent concealment of a material fact entitled the Plaintiffs to a return of their deposit.
In determining whether a seller of a home has a duty to disclose latent material defects to the buyer, the law distinguishes between inaction and action. However, this distinction, in light of modern cases is not in line with current developments of restricting the doctrine of caveat emptor.
Full disclosure of all material facts must be made whenever elementary fair conduct demands it.
Discussion. The court’s discussion primarily focused on the modern judicial trend of restricting the doctrine of caveat emptor. The reason for this restriction was that current notions of fair dealing and justice make it wrong to shield a seller who takes advantage of a buyer’s ignorance. The court found that other jurisdictions have been taking a similar route ruling that if the seller is aware of a material defect, he has a duty to disclose this to the buyer.