April 2011

Selling at the purchaser's own risk: Yes, but

By Isabelle Gingras

To avoid an eventual hidden defects claim, a non-professional seller may limit his or her responsibility by selling goods without a legal warranty at the purchaser's own risk.

However, in a recent decision confirmed by the Québec Court of Appeal (appeal rejected on demand (C.A., 2011-03-07), 500-09-021298-104, 2011 QCCA 446)), the Superior Court of Québec (Savaria v. Davignon (C.S., 2010-12-13), 2010 QCCA 6443) established that a seller must act in good faith, cooperate with the purchaser and provide all of the information necessary for the purchaser to knowledgeably and willingly choose to acquire the item or not, even when the legal warranty is expressly excluded.

In the aforementioned case, the seller sold a building at the purchaser's own risk without mentioning that it was contaminated with mold. In fact, a former tenant had sent an explicit letter to the seller in which a doctor described the serious health problems suffered by tenants caused by the mold growth.

The Court noted that the seller's failure to "transmit this essential and determinative information demonstrated his complete disregard for the interests of the purchaser and a lack of concern for the ensuing consequences. [translation]" The judge concluded that the seller's actions amounted to gross negligence and affirmed that the warranty exclusion clause was of no force or effect. The sale was reversed, and the seller was forced to reimburse the purchase for the work carried out on the building and pay punitive damages in the amount of $20 000.

The Court of Appeal rejected the seller's case, estimating that it had no chance of success.

Based on the outcome of this case, it is clear that any transaction at the purchaser's own risk must be conducted fairly. The seller must divulge all of the essential and determinative information of which he or she is aware.

Selling at the purchaser's own risk: Yes, but fairly!