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Owners

Hidden Defects

After a long search, you finally find and buy your dream home. But a few months later, the dream turns into a nightmare. You find out the roof leaks, the foundation is crumbling and the walls are full of pyrite! What can you do? Is the seller responsible?

In this Infosheet, Éducaloi gives you examples of hidden defects, explains when the seller is responsible and what a buyer can do about defects.

What is a hidden defect?

According to the law, a defect is a problem significant enough to prevent the thing from being used for the purpose for which it was bought. It also includes problems that lessen the value of the thing so much that that buyer, if he had known about the problem, would not have purchased the thing or would not have paid so much.

A defect is “hidden” when it is not apparent and when it cannot be uncovered by carefully examining the item.

Here are examples of problems that have been found to be hidden defects:

• a cracked concrete slab
  
• an attic with rotting materials
  
• a disintegrating foundation
  
• a swimming pool losing large amounts of water
  
• mould in walls
  
• electric wiring that has become dangerous after a fire

Is there a guarantee against hidden defects on all things sold?

Yes. A seller is responsible for the quality of all the goods he sells, unless he has limited his responsibility. See the question “Can the seller put a statement in a contract to avoid responsibility?”

The only exception to this rule is when goods are sold under the order of a court. This is when a court judgment is made in a person’s favour and he seizes and sells something belonging to another person in order to be reimbursed. There is no guarantee against hidden defects on the things sold after a seizure.

The guarantee of quality applies to “immovables” (houses, condos, swimming pools, garages, warehouses, sheds, etc.) and to “movables” (vehicles, appliances, furniture, electronic devices, etc.).

The guarantee applies both to professional sellers (sellers whose normal occupation is selling this type of goods) and non-professional sellers (someone who places a classified ad, for example).

When the thing sold is a moveable and the seller is a merchant falling under the Consumer Protection Act, there is also a guarantee of quality under this law. See the question “If something is defective, does the buyer have any options other than taking legal action for hidden defects?”

Does the seller have to tell the buyer about all the defects in the thing sold?

Yes. Over and above the question of the guarantee against hidden defects, a sale is a contract. As with all contracts, a person cannot lie or hide an important fact to convince someone else to agree to a contract or accept contract terms less favourable than those the person would have requested if he had known the truth.

If the seller lies or does not tell the buyer about an important fact - to the point that the buyer would not have bought the thing or would not have bought it on the same terms if he had known the truth - the buyer who was misled can ask for cancellation of the sale or for monetary compensation.

But what if the problem was obvious and the buyer or an expert hired by the buyer discovers the problem before the sale? Generally, the seller is not responsible for apparent defects. However, if the seller creates a false sense of security by minimizing the importance of the problem or by being vague about it, a judge might decide that it was a hidden defect, even if it was apparent.

To learn more about the duty to inform someone with whom you want to make a contract, consult our Infosheet Contracts  (http://www.educaloi.qc.ca/en/loi/other_infosheets/429/).

Is the seller responsible for a hidden defect he did not know about?

Yes. Even if the seller did not know about the defect, he can still be held responsible.

All the more reason that a seller is also responsible for defects he knew about but did not reveal to the buyer.

Furthermore, professional sellers – sellers whose normal occupation it is to sell the type of goods in question – are assumed to know about defects in products they sell.

When there is a hidden defect, the seller can be obliged to repair the item (or otherwise solve the problem) or offer a reduction in the sale price. If the seller knew about the defect or was assumed to know about it, he may also be obliged to pay compensation to the buyer for damage the buyer suffered. See the question “What can a buyer do if something has a hidden defect?”

Remember that, unless the seller lied or exaggerated, he is not responsible for defects mentioned to the buyer or defects that were apparent. Apparent defects are those the buyer could have noticed or known about if he had carefully examined the item. See the question “Does the buyer have to ask an expert to examine the item before buying it?”

Can the seller put a statement in a contract to avoid responsibility?

Yes, but only a non-professional seller (someone who is not normally in the business of selling the particular type of goods) can do this.

Non-Professional Seller

A non-professional seller can avoid being held responsible for a hidden defect by mentioning in the contract that the thing is sold at the buyer’s own “risk and peril”. But this statement only protects the seller if he had no knowledge of the defect: he remains responsible for defects he knew about or was assumed to know about. (See the previous question.)

Professional Seller

If the seller is a professional, he cannot avoid responsibility by stating this in the contract.

Also, when the thing purchased is a moveable and the seller is a merchant falling under the Consumer Protection Act, this law creates a legal guarantee of quality that automatically applies. The buyer therefore has a remedy despite a statement in a contract that the seller is not responsible. See the question “If something is defective, does the buyer have any options other than taking legal action for hidden defects?”

Does the buyer have to ask an expert to examine the item before buying it?

It’s not required to have an expert inspect the item, but the law does state that the buyer should carefully examine the item before buying it. If the buyer does not do this, the seller will not be responsible for defects the buyer should have noticed if he had examined the item properly.

The item being purchased does not have to be destroyed to be examined. For example, a buyer does not have to dig around a foundation to inspect it, or destroy a wall to see what it is made of.

For home purchases, even though it is not required by law, it is a good idea to get an expert to do a pre-purchase inspection. Why?

• Getting professional advice at this stage allows the buyer to discover signs of what could be a defect, and to negotiate a price that takes into account anything discovered.
  
• If there is an apparent defect for which the seller is not responsible, the buyer will be able to take action against the expert if the expert overlooked this defect.
  
• If a problem arises after the sale, the expert can present an estimate of repair costs to the court.
  
• Also, the courts sometimes find that the buyer’s inspection is not “credible” if it was not done by an expert. This can happen, in particular, when there are obvious signs of possible problems.

Does the buyer have to notify the seller when he discovers a hidden defect?

Yes. A buyer who discovers a hidden defect after the sale must notify the seller in writing within a reasonable period of time. If the buyer does not send this notice within a reasonable time period, a court could deny his claim.

The purpose of the notice to the seller is to allow the seller to make, or have made, any repairs, or to come to an agreement with the buyer about acceptable compensation. If the seller does not respond, the buyer can have the repairs done at his own expense and take legal action against the seller to be reimbursed.

A “reasonable” time period varies with the circumstances. A court will consider the time it took to learn about the nature and extent of the problem, the seller’s attitude, etc. However, the buyer should not wait too long: the seller will not be responsible if the problem gets worse and the buyer suffers damages that could have been avoided had he notified the seller earlier and given the seller a chance to react.

How is the existence of a hidden defect proved or challenged?

The buyer must prove there is a hidden defect. To be successful in a legal action against the seller, the buyer must prove:

• He carefully inspected the item before buying it, but this inspection did not reveal the defect.

And

• The defect already existed at the time of the sale. This is assumed to be the case when the buyer purchased from a professional seller or when the buyer discovered the defect shortly after the purchase. However, this assumption can be challenged by the seller.

And

• If he had known about the defect, he would not have bought the item or paid as much, or the defect prevents the thing from being used for the purpose for which it was bought.

If an expert examined the item before the purchase, the buyer can ask this expert to testify in court and to file a report showing the defect was not apparent. The buyer can also hire a different expert. On the other hand, the seller must prove one of the following:

• the defect was apparent
  
• the buyer knew about the defect
  
• the defect did not exist at the time of the sale
  
• the problem was due to normal wear and tear or misuse of the thing by the buyer

The seller can hire his own expert.

What can a buyer do if something has a hidden defect?

If the seller does nothing after being notified in writing of the hidden defect, the buyer can take legal action against the seller and ask for the following:

• that the seller repair the defect and pay for the repairs, or reimburse the cost of any repairs already done
  
• cancellation of the sale, which means that the buyer returns the thing to the seller and is reimbursed any money paid
  
• a reduction in the purchase price. To decide on a reduced price, the court looks at proof made by the buyer about the extent of the hidden defect.
  
• that the seller pay compensation for damages suffered, if the seller knew about the defect or should have known about it and did not inform the buyer. Here are some examples of compensation:

• moving expenses
  
• replacement costs
  
• living expenses during repair work
  
• stress and inconvenience
  
• expert’s fees

To help the court decide on the amount to award as a reduction in the purchase price, the buyer can get an expert to evaluate how much the value of the thing purchased has fallen in relation to the purchase price, or to evaluate the cost of repairs to fix the defect. The court can reduce this amount to take into account any added value the repairs give to the thing purchased.

To learn more about the various types of damages and how to prove them, consult our Infosheet Damages  (http://www.educaloi.qc.ca/en/loi/other_infosheets/428/)

If something is defective, does the buyer have any options other than taking legal action for hidden defects?

Yes. If the thing sold is a moveable and the seller is a merchant falling under the Consumer Protection Act, the buyer can make a request under that law instead of taking an action for hidden defects.

Let’s say Tom buys a used car at Joe Lemon, a dealer. Two days later, Tom realizes the roof of the car leaks when it rains. Tom can file a complaint with the Consumer Protection Office and try to settle the dispute with the help of the Office. Otherwise, he can go to court to ask for compensation for damages, a reduction in the purchase price or even cancellation of the sale under the Consumer Protection Act.

This last option (requesting cancellation under the Consumer Protection Act) has some advantages: Tom won’t have to prove that the defect existed before the sale or that he would not have bought the car had he known about it. He only has to make proof of the defect and the damage he suffered.

To learn more about remedies for consumers, refer to the Consumers  (http://www.educaloi.qc.ca/en/loi/consumers/) section of our website.