Caveat Emptor

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Date Retrieved:	2024-11-22
CLNP Page ID:	44
Page Categories:	[Legal Principles]
Citation:	Caveat Emptor, CLNP 44, <>, retrieved on 2024-11-22
Editor:	Sharvey
Last Updated:	2022/08/24

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Winnipeg Condominium Corporation No. 36 v. Bird Construction Co., 1995 CanLII 146 (SCC)

11 However, Huband J.A. resolved the problem by deciding that the result in this case would be the same under either the Anns or the Murphy approach. First, Huband J.A., at p. 90, found that the concept of caveat emptor negated any relationship of proximity as defined under the first stage of Lord Wilberforce's two-stage Anns approach:

The maxim, caveat emptor, operates as between purchaser and vendor. But the very existence of the principle instructs the potential purchaser to rely upon his own investigations, inspections and inquiries, and not to rely upon the fact that the vendor had retained Smith Carter Partners as architects, Bird as general contractor, and that Kornovski & Keller was one of the subcontractors, and since they are reputable firms, the integrity of the building can be safely assumed. The concept of "buyer beware" tells the potential purchaser that if it seeks greater protection than its own investigations, inspections and inquiries provide, it should seek appropriate warranties from the vendor or, if that cannot be bargained, to seek out an insurer to cover anticipated future risks.

Second, Huband J.A., at p. 86, found that the House of Lords in D & F Estates had set forth sufficiently compelling policy concerns to justify precluding recovery under the second branch of the Anns test:

The great debate as to whether the Anns case was correctly decided and should be followed, or whether the reasoning in Murphy should be preferred will rage on. But in certain cases, I do not think that the difference in approach will yield a difference in result. In the D & F Estates case, the House of Lords did in fact consider whether there were factors which should negative, reduce or limit the scope of a duty of care owed by a building contractor to the subsequent lessee of the building, or a limitation on the damages to which a breach of that duty may give rise. The court found that considerations did exist which should limit the remedy. Lord Bridge observed that with respect to defective chattels, economic loss is recoverable in contract by a buyer or hirer of the chattel entitled to the benefit of a relevant warranty of quality, but economic loss is "not recoverable in tort by a remote buyer or hirer of the chattel". Lord Bridge concluded that the same law should apply in the field of real property and this need for consistency should indeed limit the breadth of a remedy for a breach of a duty of care.

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45 The second concern is that the recognition of such a duty interferes with the doctrine of caveat emptor which, as this Court affirmed in Fraser-Reid, supra, at p. 723, "has lost little of its pristine force in the sale of land". The doctrine of caveat emptor dictates that, in the absence of an express warranty, there is no implied warranty of fitness for human habitation upon the purchase of a house already completed at the time of sale. Huband J.A. of the Manitoba Court of Appeal relied on this doctrine in concluding that no duty in tort could be owed to subsequent purchasers of a building. He presented the argument, at p. 90, as follows:

The maxim, caveat emptor, operates as between purchaser and vendor. But the very existence of the principle instructs the potential purchaser to rely upon his own investigations, inspections and inquiries . . . . The concept of "buyer beware" tells the potential purchaser that if it seeks greater protection than its own investigations, inspections and inquiries provide, it should seek appropriate warranties from the vendor or, if that cannot be bargained, to seek out an insurer to cover anticipated future risks.

46 In my view, these concerns are both merely versions of the more general and traditional concern that allowing recovery for economic loss in tort will subject a defendant to what Cardozo C.J. in Ultramares Corp. v. Touche, 174 N.E. 441 (N.Y.C.A. 1931), at p. 444, called "liability in an indeterminate amount for an indeterminate time to an indeterminate class." In light of the fact that most buildings have a relatively long useful life, the concern is that a contractor will be subject potentially to an indeterminate amount of liability to an indeterminate number of successive owners over an indeterminate time period. The doctrines of privity of contract and caveat emptor provide courts with a useful mechanism for limiting liability in tort. But the problem, as I will now attempt to demonstrate, is that it is difficult to justify the employment of these doctrines in the tort context in any principled manner apart from their utility as mechanisms for limiting liability.

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51 Turning to the second concern, caveat emptor cannot, in my view, serve as a complete shield to tort liability for the contractors of a building. In Fraser-Reid, supra, this Court relied on the doctrine of caveat emptor in rejecting a claim by a buyer of a house for the recognition of an implied warranty of fitness for human habitation. However, the Court explicitly declined to address the question of whether caveat emptor serves to negate a duty in tort (pp. 726-27). Accordingly, the question remains at large in Canadian law and must be resolved on the level of principle.

52 In Fraser-Reid, Dickson J. (as he then was) observed that the doctrine of caveat emptor stems from the laissez-faire attitudes of the eighteenth and nineteenth centuries and the notion that purchasers must fend for themselves in seeking protection by express warranty or by independent examination of the premises (at p. 723). The assumption underlying the doctrine is that the purchaser of a building is better placed than the seller or builder to inspect the building and to bear the risk that latent defects will emerge necessitating repair costs. However, in my view, this is an assumption which (if ever valid) is simply not responsive to the realities of the modern housing market. In Lempke, supra, at p. 295, the Supreme Court of New Hampshire made reference to a number of policy factors that strongly militate against the rigid application of the doctrine of caveat emptor with regard to tort claims for construction defects:

First, "(c)ommon experience teaches that latent defects in a house will not manifest themselves for a considerable period of time . . . after the original purchaser has sold the property to a subsequent unsuspecting buyer." . . .

Second, our society is rapidly changing.

"We are an increasingly mobile people; a builder-vendor should know that a house he builds might be resold within a relatively short period of time and should not expect that the warranty will be limited by the number of days that the original owner holds onto the property."

. . . Furthermore, "the character of society has changed such that the original buyer is not in a position to discover hidden defects. . . ."

Third, like an initial buyer, the subsequent purchaser has little opportunity to inspect and little experience and knowledge about construction. "Consumer protection demands that those who buy homes are entitled to rely on the skill of a builder and that the house is constructed so as to be reasonably fit for its intended use." . . .

Fourth, the builder/contractor will not be unduly taken unaware by the extension of the warranty to a subsequent purchaser. "The builder already owes a duty to construct the home in a workmanlike manner. . . ." . . . And extension to a subsequent purchaser, within a reasonable time, will not change this basic obligation.

Fifth, arbitrarily interposing a first purchaser as a bar to recovery "might encourage sham first sales to insulate builders from liability."

Philip H. Osborne makes the further point in "A Review of Tort Decisions in Manitoba 1990-1993", [1993] Man. L.J. 191, at p. 196, that contractors and builders, because of their knowledge, skill and expertise, are in the best position to ensure the reasonable structural integrity of buildings and their freedom from latent defect. In this respect, the imposition of liability on builders provides an important incentive for care in the construction of buildings and a deterrent against poor workmanship.

53 My conclusion that a subsequent purchaser is not the best placed to bear the risk of the emergence of latent defects is borne out by the facts of this case. It is significant that, when cracking first appeared in the mortar of the building in 1982, the Condominium Corporation actually hired Smith Carter, the original architect of the building, along with a firm of structural engineers, to assess the condition of the mortar work and exterior cladding. These experts failed to detect the latent defects that appear to have caused the cladding to fall in 1989. Thus, although it is clear that the Condominium Corporation acted with diligence in seeking to detect hidden defects in the building, they were nonetheless unable to detect the defects or to foresee the collapse of the cladding in 1989. This, in my view, illustrates the unreality of the assumption that the purchaser is better placed to detect and bear the risk of hidden defects. For this Court to apply the doctrine of caveat emptor to negate Bird's duty in tort would be to apply a rule that has become completely divorced, in this context at least, from its underlying rationale.

Outaouais Synergest Inc. v. Lang Michener LLP, 2013 ONCA 526 (CanLII)

[68] As the trial judge concluded, the agreement of purchase and sale between the Keenans and Outaouais is an agreement to which the doctrine of caveat emptor (let the buyer beware) applies. While that doctrine is popularly reduced to the term caveat emptor, it is helpful to recognize for our purposes that the more complete description is "caveat emptor, qui ignorare non debuit quod jus alienum emit", which translates as "let the purchaser, who ought not to be ignorant of the amount and nature of the interest, exercise proper caution" (emphasis added). See Professor John D. McCamus, "Caveat Emptor: The Position at Common Law", in Law Society of Upper Canada Special Lectures 2002: Real Property Law: Conquering the Complexities (Toronto: Irwin Law Inc., 2003), at p. 97.

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[77] This court and the Manitoba Court of Appeal have both confirmed that silence and half-truths can amount to fraudulent misrepresentation and that, where a vendor, who has no duty to speak, decides to break that silence, the doctrine of caveat emptor falls away as a defence mechanism and the vendor must speak truthfully and completely about the matters raised: see Krawchuk v. Scherbak (2011), 106 O.R. (3d) 598, [2011] O.J. No. 2064, 2011 ONCA 352, at para. 77, citing Kaufmann v. Gibson, [2007] O.J. No. 2711, 59 R.P.R. (4th) 293 (S.C.J.); Alevizos v. Nirula, [2003] M.J. No. 433, 2003 MBCA 148, 180 Man. R. (2d) 186, at paras. 18-25. These cases involved situations where vendors completed voluntary vendor disclosure statements in residential real estate transactions.

Tobey v. Loranger, 2020 ONSC 4669 (CanLII)

[24] The trial judge does not specifically address the issue of caveat emptor in his Reasons. It is not clear to what extent this issue was raised at trial. In any event I have concluded that the maxim of caveat emptor would not have provided a viable defence to the plaintiff’s claim. In the Supreme Court of Canada decision Fraser-Reid v. Droumtsekas, 1979 CanLII 55 (SCC), [1980] 1 S.C.R. 720, Justice Dickson notes that,

Although the common law doctrine of caveat emptor has long since ceased to play any significant part in the sale of goods, it has lost little of its pristine force in the sale of land.

[25] The reason why the rule of caveat emptor rarely raises a defence in the sale of goods is because of the implied conditions which are usually associated with the sale of goods. As noted by Don J. Manderscheid, Q.C. in his article Caveat Emptor and the Sale of Land: The Erosion of a Doctrine, 2001 Can LII Docs 142,

Unlike the sale of goods, in the ordinary course of the buying and selling of land, without an express warranty or contractual provision in the sale agreement, the law will not imply a warranty as to the merchantability of the land for purposes of habitation.

[26] In any event, the doctrine of caveat emptor will not be invoked in the presence of a contractual condition. See for example Matz v. Copley, 2010 ONSC 5565; affirmed by the Court of Appeal at 2011 ONCA 485. As previously noted, the trial judge found a breach of the purchase agreement. This is reflected in his comments that Dan’s Auto Sales had agreed to sell a truck that was “certified” and which turned out to be unroadworthy. He correctly concluded that this was not the plaintiff’s problem, “its Dan’s Auto Sales’ problem”.

Ashrafi v. Carraro, 2019 ONSC 6326 (CanLII)

The Doctrine of Caveat Emptor

65 Before proceeding, I pause to briefly address the doctrine of caveat emptor ("let the buyer beware").

66 The appellants submit that circumventing the parties' intentions as expressed by the entire agreement clause in the APS erodes the doctrine of caveat emptor. I disagree with the premise of this submission. Having concluded that the entire agreement clause in this case operates retrospectively, not prospectively, it cannot be said that the respondents' claim for negligent misrepresentation has the effect of circumventing the parties' intentions or the entire agreement clause.

67 At para. 38 of its reasons, the Divisional Court quoted from Killeen J.'s decision in Kaufmann, at para. 119, for the proposition that, "once a vendor "breaks his silence" by signing the SPIS, the doctrine of caveat emptor falls away as a defence mechanism and the vendor must speak truthfully and completely about the matters raised in the unambiguous questions at issue". Although the SPIS at issue in Kaufmann was expressly incorporated into the agreement of purchase and sale, I agree with the thrust of Killeen J.'s remarks. So long as a purchaser's action is not precluded by the agreement of purchase and sale, the vendor cannot hide behind the doctrine of caveat emptor if he or she breaks the silence by signing a SPIS.

Gladu v Robineau, 2017 ONSC 37 (CanLII)

[268] A vendor is not obligated to disclose all known facts affecting the use or value of the property, which may be material to a purchaser’s judgment. A purchaser must form his or her own judgment: caveat emptor.

[269] The doctrine of caveat emptor will not be displaced by silence about defects, unless the silence relates to some material fact, which there is a duty on the silent party to disclose to the other. Put another way, mere silence, without more, on the part of a vendor regarding a defect subsequently discovered by a purchaser, will not normally found a cause of action for misrepresentation or for fraud: see Alevizos v. Nirula, 2003 MBCA 148 (CanLII), 180 Man. R. (2d) 186, at para. 19.