A seller in Alberta fails to disclose a known latent defect in the property. What is the seller's potential liability?

Q: What is the correct answer to: A seller in Alberta fails to disclose a known latent defect in the property. What is the seller's potential liability?

The correct answer is The seller may be liable for fraudulent or negligent misrepresentation for failing to disclose known latent defects. Although Alberta generally follows caveat emptor for patent defects, sellers have a common law duty to disclose known latent defects — hidden issues not discoverable through reasonable inspection. Failure to disclose constitutes fraudulent misrepresentation (if intentional) or negligent misrepresentation (if careless), exposing the seller to court-ordered damages.

Q: What background knowledge is needed for this Contracts & Agreements question?

Alberta case law distinguishes between patent defects (visible, buyer's responsibility to discover) and latent defects (hidden, seller must disclose if known). The Supreme Court of Canada and Alberta courts have consistently held that caveat emptor does not protect sellers who conceal known latent defects from buyers.

Q: What is a good way to remember the answer to this Contracts & Agreements question?

Patent defects are PATENT (obvious, visible) — buyer beware. Latent defects are LATENT (hidden) — seller must tell. If the seller knows and hides, that is fraud. On the exam, if a defect is hidden and the seller knew about it, the answer involves misrepresentation liability. Buyer beware only covers visible defects.

Q: What exam tip applies to this Contracts & Agreements question?

The key distinction is patent vs. latent. Caveat emptor covers patent defects only. Sellers must always disclose known latent defects or face misrepresentation claims.

Q: How does this Contracts & Agreements concept apply in real world practice?

A seller knows their foundation has a crack causing seasonal water seepage but has covered it with drywall. This is a latent defect — not visible during a standard inspection. By failing to disclose, the seller faces liability for fraudulent misrepresentation when the buyer discovers the hidden damage.

Question

Contracts & AgreementsABMEDIUM

A seller in Alberta fails to disclose a known latent defect in the property. What is the seller's potential liability?

Answer Options

A

No liability, as Alberta follows a strict 'buyer beware' principle with no exceptions

B

The seller may be liable for fraudulent or negligent misrepresentation for failing to disclose known latent defects

C

The seller is only liable if they signed a property condition disclosure statement

D

The seller is only liable if the defect was discovered within 30 days of possession