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Caveat emptor means the seller has no general duty to volunteer defects

A worked RES examination question on caveat emptor misrep, from our Paper 2 bank — with the rule it turns on, and why each of the four options is right or wrong.

Paper 2Lesson 4Caveat emptor misrepFree — no sign-up

The question

A completed terrace house has a persistent damp problem in the master bedroom that the seller, Mr Ho, has papered over. During a viewing the buyer's agent asks Mr Ho's agent directly whether there is any water seepage. Mr Ho's agent knows about the damp but wants to avoid killing the deal. The buyer later discovers the seepage and threatens action.

Consider the following statements.

  1. (i) Under caveat emptor, the seller generally has no positive duty to volunteer defects to the buyer.
  2. (ii) If the agent affirmatively lies about the seepage when asked, that can amount to misrepresentation.
  3. (iii) A latent defect the seller knew of and concealed can fall within an exception to caveat emptor.
  4. (iv) Because caveat emptor applies, the agent may safely give a false answer to a direct question.
  1. A. (i) and (iii) only
  2. B. (i), (ii), (iii) and (iv)
  3. C. (i), (ii) and (iii) only
  4. D. (ii) and (iii) only

The answer, and why

Answer: C

The rule. Caveat emptor means the seller has no general duty to volunteer defects — but it never licenses lying. A false answer to a direct question is misrepresentation, and a concealed latent defect the seller knew of is an exception to caveat emptor.

Why C is correct. (i) no duty to volunteer, (ii) the affirmative lie as misrepresentation and (iii) the concealed-latent-defect exception are correct. (iv) is false — caveat emptor does not let the agent give a false answer.

The other options.

  • A drops (ii), the misrepresentation point.
  • B adds the false (iv), the licence to lie.
  • D drops (i), the no-duty-to-volunteer point.

Exam note. Caveat emptor is no shield for lies. The agent may decline to answer, but must never answer falsely.

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