An issue which often causes disputes between sellers and buyers is that of non-disclosure of material facts relating to the sale. Attorneys are often approached for advice by buyers who have discovered some fact after the sale which they claim would have influenced their decision on whether or not to purchase a property, and which was not disclosed to them prior to signing the contract. The question of what constitutes a material fact is not an easy one to answer and space does not allow for a detailed discussion. However, in very simple terms, it is a fact which would influence a reasonable buyer’s decision regarding whether or not to purchase a property or regarding the purchase price that they would have been prepared to pay for the property.
If a prospective seller is aware of a fact which is material to the sale, is he obliged to disclose this fact to a prospective purchaser? If, for example, a seller of a property situated in a quiet residential area is privately aware that the neighbouring land has been rezoned for heavy industry, is he under a duty to disclose this fact to the purchaser?
The late Professor Kerr (one of the leading authorities on the law of contract in South Africa during his lifetime) was of the opinion that the seller is obliged to disclose such a fact to a purchaser. According to Professor Kerr, a prospective seller’s position is as follows : he is under a duty to disclose any circumstances material to the contract of which he is aware, provided that: (i) he knows, or has good reason to believe, that the buyer does not know of it; and (ii) he knows, or has good reason to believe that the buyer has not had a reasonable opportunity of discovering it; and (iii) his knowledge and the buyer’s lack of knowledge places the parties in a markedly unequal bargaining position. The abovementioned test will have to be applied when a dispute arises between a seller and a buyer pertaining to the non-disclosure of a material fact by a seller.
As is normally the case with legal issues, each case will have to be judged on its own facts when determining whether or not a seller should, prior to the signing of the Agreement of Sale, have disclosed to the purchaser a certain fact or facts pertaining to the sale.
(Disclaimer: This article is for information purposes only and do not constitute legal or other professional advice)
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