Date: Marc Ramsay

From: Tue, 7 Oct 2008 15:33

Subject: Duty to Warn

Jason,

I usually try to avoid self-promotion, but I think my article on material-nondisclosure is on point.  University of Toronto Law Journal 56.1 (2006) 115-148.  

I argue in favour of the following principle as an ideal of corrective justice in contract.

Reasonable transparency: In the context of pre-contractual bargaining, each party is responsible for correcting reasonable, but mistaken, beliefs about the goods she brings to the table.

The buyer already satisfies this demand by the use of money, but it will sometimes require disclosure on the part of the seller. And it would extend well beyond cases involving bodily integrity.

Michael Trebilcock has argued that sellers should be under a qualified duty of disclosure because of the social disutility involved in allowing a seller to transfer defective property to an unsuspecting buyer.  Setting aside cases involving bodily integrity, buyers may engage in pointless or wasteful upgrades to the property before the relevant defects become evident.  Buyers, on the other hand, should not have to disclose what they know about the hidden value of a seller's property because allowing the buyer this advantage will help to ensure that the additional value becomes known and the resource is transferred more quickly to its highest value user.  The Limits of Freedom of Contract (Harvard University Press, 1997).

Melvin Eisenberg goes much further arguing for a duty of disclosure that would, in many circumstances, apply to buyers who know something about the hidden value of a seller's property.  "Disclosure in Contract Law" California Law Review, Vol. 91, No. 6 (Dec., 2003), pp. 1645-1691.

Regards,
Marc

Quoting "Jason Neyers":

Dear Andrew:

I know that some of the cases say that concealment involves a positive misrepresentation but do you find that convincing? What am I representing if I fix a crack in my ceiling and I repaint?

The reason I asked my question is that I think that some of these classic cases on fraudulent misrepresentation in the real estate context are really duty to warn cases in disguise, and that the right that is generating the duty to warn is the right to bodily integrity. If that is right then the warning could come on closing (so long as it was before habitation) and would not be a ground to rescind the contract of sale. Does that seem plausible?  

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