Hill v. Jones
- P agreed to purchase house from D.
- While in the house, P noticed a "ripple" in the floor and asked D if it was from termite damage. D answered that it was from water damage.
- Termite inspection came back clean.
- Shortly after the close, P noticed crumbling wood and other signs of termite damage.
- D knew of prior infestation and termite issues. Inspector claimed he should have been told about previous issues.
- P sued D to rescind the contract.
- Lower court granted summary judgment for D.
- AZ Court of Appeals reversed, found for P, new trial.
- Must a seller of property advise the buyer of material facts within his knowledge pertaining to the value of the property?
- A seller of a property must advise the buyer of material facts within his knowledge pertaining to the value of the property.
- The doctrine of caveat emptor has waned in its influence recently.
- The modern view is that a vendor has an affirmative duty to disclose material facts where… (Second Restatement §161)
- Disclosure is necessary to prevent a pervious assertion from being a misrepresentation or from being fraudulent or material
- Disclosure would correct a mistake of the other party as to a basic assumption on which that party is making the contract and if nondisclosure amounts to a failure to act in good faith and in accordance with reasonable standards of fair dealing.
- Disclosure would correct a mistake of the other party as to the contents or effect of a writing, evidencing or embodying an agreement in whole or in part.
- The other person is entitled to know the fact because of the relationship of trust and confidence between them.
- Although the law of contracts favors finality of transactions, it is unjust to strictly enforce the policy favoring finality in certain circumstances.
- FL Supreme Court said the duty to disclose arises "where the 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 to the buyer."
- The inquiry by the buyers whether the ripple was termite damage imposed a duty upon sellers to disclose what information they knew concerning the existence of termite infestation in the residence.
- Fits with 161(b).