A couple purchased a residential apartment and after receiving possession discovered severe and hidden moisture problems therein. The sellers of the property were aware of a history of flooding, sealing issues and previous proceedings regarding the moisture, but chose not to share this material information at the time of the sale and declared that the property was in good condition.
The Court held that the sellers breached the agreement in a fundamental breach entitling to compensation. As a rule, a seller of an asset owes a broad duty of disclosure to a purchaser regarding hidden defects and flaws in the asset. This duty precludes attributing contributory negligence to the purchaser, even if the latter was negligent in examining the condition of the asset or waived it, since the principle of the duty of disclosure prevails over the buyer's negligence. Here, the sellers knew or at least should have known about the historical moisture problems in the apartment, but they chose to conceal them and declared in the agreement that they were unaware of any defects. Therefore, the sellers compensated the purchasers for the actual repair costs and the liquidated damages.