Being made a fool in your personal life may cause anger or embarrassment. However, when it comes to contracts, you are not obliged to accept being made a fool, nor are you necessarily without remedies.
First, we examine the situation of the ordinary consumer who makes the most important purchase of his lifetime: buying a home. For example, you purchase a home in Laval, a home that was built in 1988, and you spend $450,000.00. One year later, when you decide to do some renovations, to your horror you discover what looks like vermiculite insulation containing asbestos. You are very confused because you remember that the owner had declared having carried out renovations within the last ten years and you know that there should be no asbestos in the insulation. You call in a professional and, after inspection, it is determined that the attic has vermiculite insulation containing asbestos. Extensive renovation and decontamination will be required. You get an estimate that it will cost you $100,000.00 to remove and replace the insulation, and to decontaminate. You decide to speak with your neighbours and they tell you that, when the previous owner did his renovations, he was aware of the vermiculite insulation but decided to do nothing about it because of the cost.
Under the rules in Quebec about purchases of homes that have defects of which the buyer could not have been aware and which were not disclosed, you have a remedy in that you are able to either undo the sale and recover the purchase price or, more commonly, to reduce the selling price to the amount that you would have paid for the property. In this case, the most likely amount you could claim would be an amount equal to what you will have to spend to correct the problem, $100,000.00. Furthermore, if you are able to prove, with the testimony of the neighbours, that the previous owner was aware of the problem or could not have been unaware of it, you would also be able to claim further damages, for example, the cost of moving out temporarily while the asbestos is removed. Because he fooled you, you have a legal remedy for the damages due to the fact that the previous owner did not disclose a defect of which he was aware.
A Laval business man decides to buy a Montreal diamond retail business, which includes importing diamonds from around the world. He does his due diligence and decides to pay a premium for the business because, in his plans, he believes that the business is about to get much more lucrative, and because he plans to move the business to a better area in Montreal closer to Westmount and Outremont where he can expect more high-end customers to frequent his shop.
Several months after the sale closes and he has been running his business, investigators from the RCMP contact him and request to meet with him. At this meeting, they inform the business man that his diamond shop may be in a lot of trouble, although he himself may not necessarily be in any criminal trouble. An ongoing criminal investigation seems to indicate that, while on paper everything in his business seems legitimate, in fact, one of his major suppliers has been dealing in illegal African conflict diamonds for 15 years. Furthermore, the president of the company that sold him the business was completely aware of this. The RCMP has both audio and video recordings as well as documents to corroborate these facts, and the investigators are on the verge of arresting the president of that company.
Our businessman has been made a fool even if he has no personal knowledge of the origin of the conflict diamonds. He does not, however, need to see his business be completely destroyed without remedy. Our Civil Code provides that error, on the part of one party of a contract induced by fraud committed by the other party to the contract, invalidates consent to a contract whenever, but for that error, the party would not have contracted or would have contracted on different terms. Fraud may result from either silence or concealment and does not have to be based on specific lies. Since our businessman would never have purchased the business if he had any suspicion that he was buying a shop supplied with conflict diamonds and since the president of the selling company never let our businessman know the source of the diamonds beyond what was on paper, our businessman has a remedy to cancel the contract and get back his money. Most probably, he has a lawsuit against the company itself, and probably against the president personally, for damages. He may also have a remedy for future damages and lost profits.
Whether in business, or in personal consumer matters, under the law one is not obliged to just be a fool. Remedies may exist when relevant information has not been communicated, or when specific lies or fraudulent statements are made in the course of forming contracts, or when important facts are actively concealed.
Franco Tamburro, Attorney-at-Law
Alepin Gauthier Avocats Inc.