By: Robert Flynn
Covenant Title Corp.

The pivotal question to be asked in analyzing a seller’s obligation begins with, “What obligation?”  Trying to research the issue using only Maryland case law as a guide will leave you frustrated and probably without a clear answer.  Many cases dating back nearly two centuries can be found, which are still good law but they refer to sellers as “vendors”.  Using a computer assisted search without the word “vendor” would lead you to think Maryland has never before addressed these issues.

Because the cases necessarily revolve around differing fact patterns, it can be somewhat difficult to glean the general rules or “black letter law” that so many of us seek when providing advice to clients or each other.  However, the source documents upon which most of the cases rely is still available for us.  Corbin on Contracts and Williston on Contracts are the textbooks for many areas involving contracts, including this one.  Each treatise provides a framework for understanding this very interesting area of law. 

 Generally, there is no duty to disclose adverse facts to the other party in a contract setting.  To hold otherwise would create the absurd result that a party would have to tell the other party that the deal is too good, and why.  That would not exactly be conducive to our commercial enterprise system. 

So, if the rule of caveat emptor is alive and well, when is it mollified?

When a statute requires a disclosure, it must be made.  Whenever a true statement when made becomes false, a duty exists to explain it.  When a confidential relationship exists, disclosure is required. Whenever a statement is offered, it must be truthful and complete.  A seller certainly cannot take active measures to hide defects.  What else is there? 

When does a seller, who knows of a latent, material defect in property, required to make a disclosure of such, given the general rule states above?

In general terms, disclosure must be made when the seller is aware of a material, latent defect.  “Material” is a fact about the property that would change a reasonable person’s purchasing decision.  “Latent” means that the defect is not readily observable or readily discoverable by reasonable means.  The cases are decided on what property, defect, material and latent are.  Williston calls this the “passive concealment” exception to the caveat emptor rule. 

In describing the pendulum swing from caveat emptor to disclosure, Corbin states:  “A Seller of … land … is under an obligation to disclose latent defects.  This is a very old doctrine, though its history is not smooth … Although the dust has not settled, it may safely be said that the older law [disclosure] once again prevails as to latent defects in consumer transactions and single family housing.”  Corbin is very concise!

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