Brief Fact Summary. The Plaintiff, Stambovsky (Plaintiff), brought suit to rescind a contract to buy a house after he discovered the house was purported to be haunted, thus lowering its value.
Synopsis of Rule of Law. A condition that impairs the value of property, known to the seller and left undisclosed to the buyer can constitute a basis for rescission of the contract.
Issue. Whether an undisclosed condition that impairs the value of the property is a basis for rescission of the contract.
Held. Reversed. A house purported to be haunted, which impairs the value of the property and is left undisclosed to the buyer can constitute a basis for rescission of the purchase agreement.
Where a condition which has been created by the seller materially impairs the value of the contract and is peculiarly within the knowledge of the seller or unlikely to be discovered by a prudent purchaser exercising due care with respect to the sale, nondisclosure constitutes a basis for rescission as a matter of equity.
Even an express disclaimer e.g. “as is” will not be given effect where the facts are peculiarly within the knowledge of the party invoking it.
The doctrine of caveat emptor requires that a buyer act prudently to assess the fitness and value of his purchase and operates to bar the purchaser who fails to exercise due care from seeking the equitable remedy of rescission.View Full Point of Law