Tom and Jerry created a joint venture to purchase an old house in Chicago, Illinois. They intended to renovate the home and “flip” it for a fast sale. Neither Tom nor Jerry had any background in home renovation, though they both thoughts of themselves as “handy with tools”. Tom and Jerry purchased the Chicago home on July 15 at a foreclosure auction.
Tom and Jerry began to renovate the home on July 22. During the process of renovation, Tom accidentally punctured two water pipes leading into the basement. Because of the punctures, water flooded the basement. Two days later, and after drying out the basement, Tom noticed several dark marks on the walls in the basement. Tom called Jerry to look at the stains. The stains were very dark and located directly behind the broken water pipes. They mistakenly believed that the marks were water stains caused by the broken water pipes. In reality, the marks were not caused by the broken pipes. Instead, they were a form of mold, easily recognizable to an experienced contractor, which required special treatment to eliminate. Thinking nothing of the stains, Tom and Jerry washed and disinfected the entire wall and then painted the entire basement a dark gray. The washing and painting succeeded in temporarily covering up and abating the mold’s growth.
Tom and Jerry finished renovating the home on August 25. After placing an advertisement to sell the home, they were contacted by Chris and Savanna. Chris and Savanna were partners in a large architect consulting firm in Evanston. They were tired of the "rat race" and wanted to simplify their lives. They had visited Chicago many times and thought the city was a perfect place to retire. Following a tour of the completely renovated property, Tom and Jerry presented Chris and Savanna with a proposed sales agreement offering to sell the home for $750,000. In response to Chris’s question about any conditions on the property that would aggravate her chronic asthma, Tom agreed to include the following in the proposed agreement: “There is no lead-based paint, asbestos, or mold/fungi contamination on property.”
Based upon Tom’s representation about the absence of any harmful conditions on the property, Chris and Savanna decided to forego a professional inspection of the property and immediately signed the sales agreement. Using a form obtained from the Internet, Tom and Jerry later conveyed their home to Chris and Savanna for $750,000. Shortly after taking possession of the home, to Chris's allergies worsened. Chris grew increasingly ill. Concerned that Chris's health was connected to the home, Chris and Savanna hired a professional inspector. It was during this time that Chris and Savanna learned of the mold problems in and around the basement. Chris and Savanna decided to sue Tom and Jerry for rescission of the contract based on misrepresentation.
What is the likely result? What arguments will each party make.
For purposes of this paper, the rule of law is defined as follows:
The defendant made an untrue assertion of fact.
The fact asserted was material or fraudulent.
The plaintiff entered the contract because of reliance on the assertion.
The reliance was reasonable.
The plaintiff was harmed.
The likely result in this situation is that home buyers Chris and Savanna will succeed in getting the contract rescinded and be entitled to damages. This outcome is probable due to fact that the assertion made by the contractors Tom and Jerry was that the home was free from harmful conditions such as fungi infection. Even though the contractors did not have any fraudulent intentions while making this representation to the buyers, they made a misstatement which is material to the existence of the contract, the agreement itself contained a clause stating that the home was free from fungi infection. It does not matter that the misstatement was not intentional, the contractors were liable to uphold the terms stated in the contract and they failed in that duty due to their lack of experience. Hence it is likely that the home buyers will succeed in their lawsuit.
Arguments made by Tom and Jerry:
1. The representation made to the buyers at the time of selling the home was correct and valid in the eyes of Tom and Jerry, they had no reason to question the validity of their representation.
2. They had tried, to the best of their abilities to remove harmful conditions from the property.
3. They had no knowledge up to the time of sale of the home about the fungi infection at the property, they therefore had not concealed any material facts from the home buyers.
Arguments made by Chris and Savanna:
1. The buyers will highlight the fact that the agreement of purchase contained a clear clause stating that the house would be free from harmful conditions like fungi.
2. The fact that the misstatement by the contractor was unintentional is irrelevant, they had agreed in writing to provide a defect free house, the issue of fungi infection should have been identified and resolved by the contractor which was not done due to a lack of proper experience, hence there is negligence on the part of the contractor.
3. The buyers purchased the home in good faith and believed the contractor's representations, they were not expecting to face any fungus related issues. Due to the contractor's statements, the buyers moved into the home and their health deteriorated due to the harmful conditions present at the property. Hence the damage caused to the plaintiffs was real and could have been avoided entirely had the contractors taken proper care while renovating the property.
Tom and Jerry created a joint venture to purchase an old house in Chicago, Illinois. They...