In May of 1982, the Davises entered into a contract to buy for $310,000 the Johnsons’ home, which at the time was three years old. The contract required a $5,000 deposit payment, an additional $26,000 deposit payment within five days and a closing by June 21, 1982. The crucial provision of the contract, for the purposes of the case at bar, is Paragraph F which provided:
- Roof Inspection: Prior to closing at Buyer’s expense, Buyer shall have the right to obtain a written report from a licensed roofer stating that the roof is in a watertight condition. In the event repairs are required either to correct leaks or to replace damage to facia or soffit, seller shall pay for said repairs which shall be performed by a licensed roofing contractor.
Before the Davises made the additional $26,000 deposit payment, Mrs. Davis noticed some buckling and peeling plaster around the corner of a window frame in the family room and stains on the ceilings in the family room and kitchen of the home.
Upon inquiring, Mrs. Davis was told by Mr. Johnson that the window had had a minor problem that had long since been corrected and that the stains were wallpaper glue and the result of ceiling beams being moved. There is disagreement among the parties as to whether Mr. Johnson also told Mrs. Davis at this time that there had never been any problems with the roof or ceilings. The Davises thereafter paid the remainder of their deposit and the Johnsons vacated the home. Several days later, following a heavy rain, Mrs. Davis entered the home and discovered water “gushing” in from around the window frame, the ceiling of the family room, the light fixtures, the glass doors, and the stove in the kitchen.
Two roofers hired by the Johnsons’ broker concluded that for under $1,000 they could “fix” certain leaks in the roof and by doing so make the roof “watertight.” Three roofers hired by the Davises found that the roof was inherently defective, that any repairs would be temporary because the roof was “slipping,” and that only a new $15,000 roof could be “watertight.”
The Davises (buyers) filed a complaint alleging breach of contract, fraud and misrepresentation, and sought recission of the contract and return of their deposit. The Johnsons counterclaimed seeking the deposit as liquidated damages.
Court Case on Disclosure