Western Cape High Court affirms courts’ strong approach against sellers fraudulently concealing latent defects from buyers, despite ‘voetstoots’ clause

A ‘voetstoots’ clause is a clause which one would usually find in terms and conditions of trade, or purchase and sale agreements, in which the seller contracts out of liability for patent and latent defects. Unlike a patent defect, a defect is latent if it is not visible or discoverable upon reasonable inspection. Although a voetstoots clause provides the seller with a defence should a patent or latent defect later be discovered by the buyer; the seller may not act fraudulently. A seller acts fraudulently when aware that a latent defect exists, and deliberately refrains from informing the buyer. Should a seller knowingly fail to disclose any material latent defect, a buyer may be entitled to  cancel the sale, claim repayment of the purchase price or claim a reduction of the purchase price, depending on the nature and extent of the defect. If the seller genuinely did not know about the latent defect, however, the seller will not be held liable.

The Western Cape High Court recently affirmed that if a contract of sale contains a voetstoots clause and the seller fraudulently conceals knowledge of a latent defect from the buyer, the buyer will be entitled to appropriate relief. In the particular case, the seller laid cement screed over wooden floors and covered them with carpets and tiles in order to deliberately hide the unevenness from the buyer.

Sellers must be aware that they will be held accountable for failing to disclose knowledge of a latent defect, even if the contract of sale contains a voetstoots clause. Buyers must therefore show the necessary due diligence when entering into a contract of sale and at the time of purchase.

Read the judgment here: http://www.saflii.org/za/cases/ZAWCHC/2015/145.html