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12. Such action should be based upon a claim of
The buyer brought an appropriate action against the seller seeking cancellation of the deed and return of all monies paid.
Upon expiration of the 90 days, the municipality required the buyer to stop using the loading docks. This action substantially reduced the value of Blackacre.
During the 90 days, the seller sold and conveyed Blackacre by warranty deed for substantial consideration to a buyer. The problem of the loading docks was not discussed in the negotiations.
A seller owned Blackacre, improved with an aging four-story warehouse. The warehouse was built to the lot lines on all four sides. On the street side, recessed loading docks permitted semi-trailers to be backed in. After the tractors were unhooked, the trailers extended into the street and occupied most of one lane of the street. Over the years, as trailers became larger, the blocking of the street became more severe. The municipality advised the seller that the loading docks could not continue to be used because the trailers blocked the street; it gave the seller 90 days to cease and desist.
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Sellers of real property are obligated to disclose problems that could affect the property's value or desirability. In most states, it is illegal to fraudulently conceal major physical defects in the property. Generally, sellers are responsible for disclosing only information within their personal knowledge.
A is correct. The traditional common law rule is that a seller does not have liability for failing to disclose to a buyer defects in the property or facts that reduce the property's value. However, there have always been exceptions to this general principle of non-liability for non-disclosure of defects known by the seller. First, the seller will have liability if she makes an affirmative misrepresentation about the property that is relied upon by the buyer. Second, the seller will be liable in fraud if she takes affirmative action to conceal or cover over the defect. Here, the seller knew of a pending cease and desist order, that the order was not apparent, and that the order seriously reduced the value of the property; the seller's failure to disclose the pending cease and desist order will serve as the basis for the buyer's cause of action.
B is incorrect. The covenant of warranty is one of the six covenants included in a general warranty deed, where the seller guarantees to defend the title against anyone who unlawfully claims title to the property being conveyed. The seller has not breached the covenant of warranty — that is a covenant relating to the title to the property. The facts do not indicate that the seller gave bad title.
C is incorrect. Consideration is a promise of something of value given by a promisor in exchange for something of value given by a promisee; typically, the thing of value is goods, money, or an act. In this question, consideration is not at issue for either of the parties because valuable consideration for the transaction was provided by both parties.
D is incorrect. A mutual mistake occurs when the parties to a contract are both mistaken about the same material fact within their contract. They are at cross-purposes. There is a meeting of the minds, but the parties are mistaken. Hence, the contract will be voidable. The facts indicate that the seller was aware of the impending restriction on trailer use, so there was no mistake on the seller's part.