CO NCEALM ENT A N D N O N -D ISC LO SU R E

OF QUALITY-RELATED DEFECTS
IN CO NTRACTS
J a m e s D. Bissell*
INTRO DUCTIO N
T h e p u rp o se o f this p ap e r is tw o-fold. T h e first is to ex a m ine
the ancient but relatively unex plored c o m m o n law rules o f co n c ea l­
m e n t o f qu ality -re la ted defects. T h ese rules apply equally to every­
d ay c o n s u m e r c o n tra c ts for the p u rch a se and sale o f goods, as they
d o to c o n tra c ts for a business o p p o r tu n ity or for the sale o f real es­
tate. This p ap e r is c oncerned with the c o n c ea lm e n t or non-disclosure
o f m a teria l facts and defects in goods and p ro p erty which do not
bec o m e a p a r t o f the implied or express te rm s o f the final co n tra c t.
A stud y o f the c o m m o n law reveals, p e rh a p s surprisingly, th a t m a n y
o f the tactics e m ployed by businessm en a n d even private sellers to in­
duce a c u s to m e r to buy before form ing an in d epen dent opinion as to
the quality o r value o f the go ods or p ro p erty , m a y co n stitu te
f ra u d u len t c o n c ea lm e n t, entitling the buyer to an action in deceit for
d a m a g e s an d rescission. H ow ever, in their a t te m p t to in tro d u c e a
d eg ree o f conscionability into the b arg a in in g process, the c o u rts have
not forgotten the m a x im caveat em ptor. T h erefo re, the c o m m o n law
has reached a point in its dev e lo p m e n t w here a r a th e r a r b itra ry dis­
tinction is d r a w n between the m e re failure to disclose defects which
the bu y er obviously does not know exist a n d active steps ta k en to
prevent discovery o f those defects. O nly the la tte r c ourse o f cond u c t
is actionab le.
T h e se conda ry p urpose o f this pap e r is to ex a m in e the a r ­
tificiality o f the distinction between non-disclosure and active c o n ­
c e a lm e n t and to look at recent sta tu to r y reform s in the a r e a o f dis­
closure. It is su bm itte d th a t a d u ty to disclose know n existing
m a te r ia l defects would p r o m o te the interests o f establishing c o n ­
scionability in c o n tra ctin g while still m a in ta in in g the desired aim s o f
c e r t a i n t y a n d fin a lity . T his has alre ad y been achieved to a c o n ­
siderab le ex ten t in the c o m m o n law o f m o st o f the U n ite d States.

* Jam es D. Bissell, Sackville, N.B., of the New Brunswick and Nova Scotia bars.
This paper was originally prepared as a supplementary writing program under
Professor Karl J. Dore, of the Faculty of Law at the University of New Brunswick
and was revised and updated in February, 1976.
 U. N. B. L A W J O U R N A L 55

W hile it is beyond the scope o f this p a p e r to e x a m in e the are a o f

sta tu to r y reform it should be noted th a t the need for stronger dis­
closure req u irem en ts has been felt by m a n y legislators in the U nited
S ta te s and C a n a d a , an d elsewhere, w here higher sta n d a r d s o f c o n ­
duct have been im posed a n d new kinds o f relief established by
legislation which is a im e d at either the regulation o f specific trades
or at the sale o f goods g en e rally .1
PART ONE
C O N C E A L M E N T AND D IS C L O SU R E OF
Q U A L IT Y -R E L A T E D D E FE C T S:
T H E C O M M O N LAW
I. T H E R I G H T T O R E M A I N S I L E N T
T h e c o m m o n law m a x im caveat e m p to r is still very m uch a part
o f the law o f co n tra cts . Its vitality is especially g re a t with respect to
private sales a n d sales o f specific goods where the buyer has been af­
forded an o p p o rtu n ity to inspect the go ods and is th erefore deem ed
to have ta k en th e m subject to any a p p a r e n t, or patent, d efe ct.2 T he
purpose o f this p ape r is to ex a m in e this m a x im as it relates firstly to
the du ty to disclose, and secondly the d uty not to conceal, defects g o ­
ing to the quality o f the subject m a tte r in c o n tra c ts for the sale o f
goods. Essentially, the risk o f all defects in goods falls upon the
b u y e r3 unless (a) th e seller has expressly assum ed the risk by a te rm
o f the c o n tra c t o r a represe ntation ; or (b) if there is an im plied con d i­
tion o r w a r ra n ty under the N ew Brunswick Sale o f Goods A ct* T he
Sale o f Goods A c t has severe lim itations upon its scope because
m ost o f the im plied te rm s relating to quality are restricted to sales
m a d e in the o r d in a r y course o f business a n d fu rth e r because o f the
unce rtainty asso ciated with such phrases as “ fitness for p u r p o s e ”
and “ m e rc h a n ta b ility ” .5
T h e rules related to risk m ay seem to p ro duce harsh results
upon a buyer who has been the victim o f unscrupulo us tra d e p ra c ­

1 See, for example, MOTOR VEHICLE IN F O R M A T IO N A N D C O ST S A V ­

IN G S A C T \5 U .S.C.A . 1988, 1989; UNIFO RM C O N SU M ER S A L E S PRAC­
TICES A C T (U .L.A .); TRAD E P RAC TIC ES A C T , S B C. 1974, c.96; Bill 55,
4th Sess., 29th Legis., O ntario 23 Eliz. II, 1974; Bill 21, 4th Sess., 17th Legis.,
Alberta 24 Eliz. II, 1975.
2 O ntario Law Reform Commission, R E P O R T ON C O N SU M ER W A R R A N ­
TIES A N D G U A R A N T E E S IN THE S A L E OF GOODS (O ntario, Departm ent
of Justice, 1972) p. 32.
3 See: P.S. Atiyah and F.A .R. Bennion, “ M istake in the Construction of
C ontracts;, (1961), 24 Mod. L.Rev. 421 at 433.
4 R.S.N .B. 1973, c. S-l ss. 13-16.
5 O ntario Law Reform Commission, Supra n.l at pp. 36-41.
56 U. N. B. L A W J O U R N A L

tices. All too often a vendor, fully a w a re o f the defects in his goods
offered for sale, and co g n iza n t o f the b u y e r ’s ig norance o f those
defects, m a y by his silence unlo a d tho se good s o n to the unsuspecting
p u r c h a s e r . G enerally, the b uyer in such c irc u m sta n ce s will be left
w ithou t a rem ed y because the law im poses n o obligation on th e seller
to disclose defects. M e re silence is not a m isre p re sen tatio n however
deceptive it m a y be in fact. T h e m e re offer to sell defective goods
with the know ledge th a t they a re defective is not f r a u d / T h e r e a re a
few m a jo r exceptions to this general right to rem a in silent. Briefly,
the exceptions are as follows:
(a) A du ty to disclose arises with respect to facts c o m in g to the
seller’s notice before th e conclusion o f the c o n tra c t if they
falsify an express r e p rese n tatio n m a d e p r e v i o u s l y . 7
(b) A d u ty to disclose all m a teria l facts arises when the seller
m a k e s an express r e p rese n tatio n which is incom p lete and
th us a m o u n ts to a h a lf- tr u th .8
(c) I f it can be show n th a t it is a cu s to m of the tra d e to disclose
defects, then it is a m is re p re se n ta tio n to fail to disclose the
defect.9
(d) In c o n tra c ts uberrimae fid e s , o r where so m e fiduciary d u ty
exists between the c o n tra c tin g parties, disclosure is a p re re ­
qu isite.10
(e) I f the decision o f the English C o u r t o f A p pea l in Karsales
(H arrow ) Ltd. v. W allis 11 is ca rrie d to its n a tu ra l conclusion,
then a seller m a y be liable for failing to disclose a defect
arising between the tim e o f e x a m in a tio n o f the goods by the
bu yer and the tim e the risk passes to the buyer.
( 0 Finally, recent d eve lo pm e nts in to rt law an d pro d u cts
liability, particularly the ju d g m e n t o f the S u p re m e C o u r t o f
C a n a d a in R ivtow M arine Ltd. v. Washington Iron W orks'2
im pose an obligation on m a n u fa c tu r e rs a n d retailers to w arn
o f defects in goods which pose a potential d a n g e r to the
physical safety o f those using th e p rodu ct. Ritchie J. said
th a t “ . . . know ledge o f the d a n g e r involved in th e c ontin u ed
use . . . for the p u rp o se for which they [pintle-type cranes]
were designed ca rrie d with it a duty to warn those to w hom

6 Ward v. Hobbs (1877), 3 Q.B.D. 158, affirmed (1878), 4 A.C. 13 (H.L.).

7 With v. O' Flanagan [1936] Ch. 575; Briess v. Woolley, [1954] A.C. 333.
8 Dimmock v. Hallett (1866), 2 Ch. App. 21; Peek v. Gurney (1873) L.R. 6 H.L.
377, 392; Arkwright v. Newbold (1881), 17 Ch. D. 301, 318.
9 Jones v. Bowden (1813), 4 Taunt. 847; 128 E.R. 565.
10 Carter v. Boehm (1766), 3 Burr. 1905.
11 [1956] 2 All E.R. £66; [1956] 1 W .L.R. 936. See: Atiyah and Bennion, “ M istake
in the Construction of C ontracts" (1961), 24 Mod. L. Rev. 421 at 430.
12 [1974] S.C .R . 1189 (S.C.C.).
 U.N.B. L A W J O U R N A L 57
cranes h ad been supplied” .13 It should be n ote d th a t this d uty
applies even after the delivery o f the goods to th e p u rch a ser
but a p p e a rs restricted to defects liable to result in personal
injury.
T h e right to rem a in silent does not give rise to the right to c o n ­
ceal the existence o f so m e defect o r som e o th e r m a te ria l fact. T h e
c o m m o n law distinguishes between the v e n d o r ’s passive ac­
quiescence in the self-deception o f the buyer a n d the active co n c e a l­
m e n t o f defects in the goods being offered for sale. T h e la tte r
a m o u n ts to a fraudulent m isre p re sentation, w hereby th e p u r c h a se r is
entitled to sue for d a m a g e s o r to rescind the co n tra c t. A ctive c o n ­
ce a lm e n t was recognized as a f ra u d u len t m is re p re se n ta tio n as early
as 1862 in H orsfall and A nother v. Thomas'4 a n d still fo rm s a p a r t o f
o u r c o m m o n la w .15 T his d u ty was expressed in K err on Fraud and
M ista k e 16 in the following m anner:
"A Vendor may not...use any art or practise any artifice to conceal defects,
or make any representation for the purpose of throwing the buyer off his
guard, or use any device to induce the buyer to omit inquiry or exam ination
into the defects of the thing sold. If he says or does anything whatever with
an intention to divert the eye or obscure the observation of the buyer even in
relation to open defects, or to prevent his use of any present means of obser­
vation, there is misrepresentation” .
T h e seller im pliedly represents th a t the article is in fact w h a t ex facie
it p u r p o rts to be; th a t is to say, the article has been given the a p ­
p e a ra n c e o f possessing better quality o r c o ndition th a n it actually
possesses.17 This ap p e a ra n c e a m o u n ts to a m is re p re sen tatio n .
II. ACTIVE CO NCEALM ENT: TY PES
A . IN T R O D U C T IO N
Practical difficulties arise, however, in a tte m p tin g to d istinguish
between con c ea lm e n t a n d m ere silence. T h e distinctio n is crucial to
the success o f any action b rou ght by the pu rch a ser. T h e te rm
“ c o n c e a lm e n t” creates notions o f som e positive act a n d no t merely a
sta te o f m ind. O n th e other h and, non-disclosure o r silence is an
om ission, r a th e r than a positive act. It is consistent only with c o m ­
plete passiveness on the v en d o r’s p a r t vis-à-vis the d efect o r fact,
althou gh, there m a y be a “ guilty” sta te o f m ind. O n ly by an e x ­
a m in a tio n o f the cases is it possible to arrive at so m e satisfac to ry

13 Id ., at p. 1200
14 (1862), 1 H. & C. 90, 158 E.R. 813.
15 See, for example: Ames v. Investo Plan Ltd. et al (1973), 35 D .L.R. (3d) 613
(B.C.C.A.).
16 Denis Lane McDonnell and John George M onroe, (London: Sweet and Maxwell,
1952) p. 49.
17 Spencer Bower and Sir Alexander Kingcome Turner, THE L A W OF AC~
TIO N AB LE M ISR E P R E SE N T A T IO N (London: Butterworths, 1974), p. 72.
58 U. N.B. L A W J O U R N A L

conclusion as to th e n a tu re o f this all im p o r ta n t distinction between

c o n c ea lm e n t and non-disclosure.
Essentially the types o f co n c e a lm e n t which a m o u n t to a
frau d u len t m isre p re sen tation, entitling the p u rch a ser to an action in
deceit seem to fall generally into one or m o re o f the following
categories:
(1) steps ta k en to prevent ex a m in a tio n ;
(2) c a m ouflag ing the defect;
(3) diversion o f the b u y e r ’s a ttention ;
(4) avoidance o f the b u y e r’s suspicion; or
(5) creation o f a false m a rk e t.
T h e re is however, nothing sacred a b o u t the preceding classifica­
tions an d it is quite possible t h a t o th e r m e th o d s o f c o n c ea lm e n t could
be co n stru e d as fraudulent m isrepresentations.
B. TH E TYPE S
(i) Steps Taken to Prevent Examination.
T h e philosophy behind the m a x im caveat em ptor is th a t the
pu rch a ser is free to inspect the g oods or pro p erty offered for sale.
H e should therefore be responsible for his failure to discover patent
defects. C onsequently, any a t te m p t by th e vendor to prevent the
p u r c h a s e r ’s e x a m in a tio n o f the goods o r pro p erty an d to thereby
avoid his discovery o f the defects, a m o u n ts to a c tion a ble co nceal­
ment.
Schneider v. H eath 18 provides the best illustration o f co n ceal­
m e n t by m eans o f avoiding inspection. In th a t case, the d efe n d an t
had ta k en his ship, the Ju n o , from the w a te r to dry d o c k for m in o r
repairs when he discovered th a t the ship’s keel was in an advanced
state o f deterio ratio n . T he D efen da nt p ro m p tly “ to o k h er fro m the
ways on which she lay, and where the sta te o f her b o tto m a n d her
keel m igh t easily have been discovered, and kept her co nstantly
afloat, so th a t these defects were com pletely concealed by the
w a te r .1” ’ T h e ship was advertised for sale “ with all defects” a n d sold
to the Plaintiff. Lord M ansfield, C .J. held th a t such co nduct co n ­
stituted “ positive fra u d ” , entitling the plaintiff to a retu rn o f his
deposit. Intention to d efrau d the P lain tiff was im plied from the
D e fe n d a n t’s conduct.
Schneider v. Heath should be co n tra ste d with Baglehole v.
W alters20, w here L o rd E llenborough affirm ed the sale o f a ship “ with
all d efe cts” on th e g round th a t no active step h ad been ta k e n to c o n ­

18 (1813), 3 Camp. 506, 170 E.R. 1462.

19 Id., 170 E.R. 1462 at 1463.
20 (1811), 3 Camp. 154, 170 E.R. 1338.
 U.N.B. L A W J O U R N A L 59
ceal the defect. Since th e a ll-im p o r ta n t re q u ire m e n t for som e
positive act, such as retu rn in g the ship to the w ate r to prevent ex­
a m in a tio n , was lacking, the d e fe n d a n t was guilty o f no fraud. L ord
E llenb orough said: “ In a c o n tra c t such as this I thin k there is no
fraud, unless the seller, by positive m eans , renders it im possible for
th e p u rch a ser to detect la ten t faults.” 21
A n o th e r c o m m o n m e th o d o f preventing the p u rc h a se r from
co nductin g an e x a m in a tio n o f the goods being offered for sale is by
m e a n s o f a falsehood to the effect th a t the goods for so m e reason
c a n n o t be inspected. This tactic is frequently em p lo y ed in the sale o f
real property . F o r exam ple, in Leeson v. D arlow22 the d efe n d an t
w ould not allow the P la in t if f s rep rese n tative to see any p a r t o f the
te n e m e n t house except the b as em e n t by suggesting:
“ . . . it would be unwise to make any attem pt to see through the building,
that the tenants objected to being shown through, prospective purchasers
and such like and that it would be better not to go through” .23
T h e re followed a positive as su ra n c e th a t th e prem ises were in excel­
lent repair; nonetheless, the a t te m p t to prevent the p u rch a ser from
discovering the d ila p id a ted condition o f the house constitu ted a
frau d u len t c onc ea lm e nt. M a ste n J.A . o f the O n ta r io C o u r t o f A p ­
peal said:
Active concealment of a fact is equivalent to a positive statem ent that the
fact does not exist. By active concealment is meant any act done with intent
to prevent a fact from being discovered...24
A sim ilar finding was m a d e in A bel v. M acD onald 25 when the
plaintiff purchased premises in such a sta te o f rep a ir th a t they im ­
m ediately collapsed. T h e D efendant had prevented the plaintiff
from discovering the sta te o f disrep a ir by refusing to allow the p lain­
tiff to ex a m ine ce rta in ro o m s o f the house on the excuse th a t her
child was ill a n d also by d raw in g the blinds to th ose r o o m s to
fru stra te any a t te m p t m a d e by the plaintiff to inspect from the o u t­
side.
(ii) Camouflaging The Defect
A n o th e r positive act a m o u n tin g to frau dulen t co n c e a lm e n t is
the cam o u flag in g o f defects. As stated in K err on Fraud A nd
M istak e , “ ...a vendor m a y not...use any art or practise any artifice to
conceal defects...for the purpose o f throw ing the buyer off his gu ard ,
or use any device to induce the buyer to o m it inquiry o r ex a m in a tio n

21 Id., 170 E.R. 1338 at 1339.

22 (1926), 59 O .L.R. 421; (1926] 4 D.L.R. 415 (Ont. C.A.)
23 59 O .L.R. 421 at 439-440.
24 59 O .L.R. 421 at 440.
25 (1964), 45 D.L.R. (2d) 198 (Ont. C.A.).
60 U.N.B. L A W J O U R N A L

into th e defects o f th e thing sold” .26

In H orsfall and A nother v. Thomas 27 the d efe n d an t o rd e re d a
c a n n o n from the plaintiff, giving tw o bills o f e x c h an g e in p a y m e n t
therefor. T h e d efe n d an t d efa ulted on the second bill when a defect in
the c a n n o n caused it to explode. T h e d efe n d an t claim ed th a t the
p la intiff h a d inserted a m etal plug in the c a nnon to conceal the defect
from any person inspecting the gun. Bram well B. said th a t the
d efe n d an t w ould have been justified in rescinding the c o n t r a c t if
there was evidence o f active co n c e a lm e n t which did in fact conceal
the defect. H ow ever, since th e c o u r t found th a t the d efe n d an t h ad
not ex a m in e d the can n o n , it was im possible for the a t te m p te d c o n ­
c e alm en t to have h ad any o p e ra tio n on the d e f e n d a n t’s m ind o r c o n ­
duct. O n this gro u n d , ju d g m e n t w as entered for th e plaintiff vendor.
T h a t p a r t o f Bram well B.’s ju d g m e n t has since been questioned. T he
facts presented in th e case could equally su p p o rt th e conclusion th a t
the d efe n d a n t did indeed ex a m in e th e cannon . C o c k b u rn L .J. in
Sm ith v. Hughes 28 w ould likely have allowed the d efe n d a n t to
rep u d ia te th e c o n tra c t on gro u n d s o f active c o n c e a lm e n t t a n t a m o u n t
to fraud. C e rtain ly the p la in tif f s a t te m p t in the Horsfall case m et
the test o f active c o n c ea lm e n t put forth by M a ste n J.A . o f the O n ­
ta rio C o u r t o f A ppea l in Leeson v. Darlow: “ ...to cover over the
defects o f an article sold with intent th a t they shall not be discovered
by the buyer h as the sa m e effect in law as a s ta te m e n t in w ords th a t
those defects do not exist” .29
Defects m a y also be ca m o u fla g e d by the m e th o d o f packing. It
is no t u n c o m m o n , for e xam ple, to p urch a se a bushel o f w h at ap p e ars
to be fresh, ripe apples, only to discover upon rem oving the to p layer
th a t the bulk is neither ripe n or fresh. W hile this m ay at tim es fall
und er the sale by sa m ple rules o f th e N ew Brunswick Sale o f Goods
Act*0, such practices w ould also seem to c o nstitute active co nceal­
m ent. In Udell v. A therton 3I, M a rtin B. suggested th a t it was
fra u d u len t to conceal a hole in a log o f m a h o g a n y being offered for
sale by tu rnin g the log over. In Jones v. Bowden'2 it was held th a t a
m is re p re se n ta tio n h ad been m a d e in the sale o f se a-d a m a g e d
pim e n to , when the sam ples from the bulk show ed no such defect in
the pim ento.

26 Supra., n. 16 at p. 49.
27 (1862), 1 H. & C. 90, 158 E.R. 813.
28 (1871), L.R. 6 Q.B. 597, See: J.P. Benjamin, B E N JA M IN ON S A L E S (New
York: H urd and Houghton, 1877) p. 441-442.
29 Supra., n. 22 at 59 O.L.R. 440.
30 R.S.N .B. 1973, c. S -l, ss. 14, 16.
31 (1861), 7 H. & N. 172; 158 E.R. 437.
32 (1813), 4 T aunt. 847; 128 E.R. 565. See: Bower and Turner, THE LA W OF AC ­
TIO N AB LE M ISR E P R E SE N T A T IO N , supra, n. 17, p. 72.
 U. N. B. L A W J O U R N A L 61

H ill v. G ray 33 is a cu rio u s case. In th a t case, the defe n d an t

pu rch a sed a p ic ture u nder th e m is ta k e n belief th a t it belonged to Sir
Felix A g a r. T h e p la in tif f s age nt knew th a t th e defe n d an t la boure d
u n d er this delusion, but said nothing. T his w ould seem to be the
classic case w here m e re silence or reticence on the p a rt o f the vendor
would not a ffo rd the d e fe n d a n t p u rch a ser an o p p o r tu n ity to rescind
the c o n tra c t or to seek d a m a g e s . Y et L ord E lle nbo ro ugh said:
“ Although it was the finest picture that Claude [the actual artist] ever
painted, it must not be sold under a deception. The agent ought to have
cautiously adhered to his original stipulation, that he should not com ­
municate the name of the proprietor, and not to have let in the suspicion on
the part of the purchaser which he knew enhanced the price. He saw that
the defendant had fallen into a delusion in supposing the picture to be Sir
Felix A gar’s, and yet he did not remove it...This case has arrived at its ter­
mination, since it appears that the purchaser laboured under a deception, in
which the agent permitted him to remain, on a point which he thought
m aterial to influence his judgm ent.”34
T his case is not easily reconciled with both earlier and later
authorities. It is difficult to find any positive act o f con c ea lm e n t
from the facts as stated in the case. Y et in K eates v. Earl Cadogan,
this was described as a case o f positive “ aggressive d eceit” .35 H ill v.
Gray has not, however, developed as a la n d m a r k case in th e law o f
c on c ea lm e nt. L a te r auth o rities would still seem to requ ire som e
m o r e positive act on the p a r t o f the seller before holding him liable
for fra u d u le n t m isre p re sen tatio n . Indeed, in K eates v. Cadogan
itself, Jervis C .J. did not find any active co n c e a lm e n t by the V endo r
in failing to disclose to the vendee the ruinous a n d unsafe condition
o f th e h ouse being sold, even th o u g h the vendee was clearly labouring
u nder a deceptive belief as to the cond itio n o f the p rop erty. Ben­
jam in On Sales suggests t h a t it was the a ct o f th e agent in pu ttin g the
picture a m o n g those belonging to S ir Felix A g a r which constituted
the c o n c e a lm e n t.36 Such an ex p lan a tio n is consistent with the view
th a t cam o u flag in g a fact, o r defect, a m o u n ts to active co ncealm ent;
however, if such be th e case, it is only the very slightest o f acts upon
which th e C o u r t will seize in o rd e r to find active co n c ea lm e n t as o p ­
posed to m e re silence.
O th e r frequent a t te m p ts a t cam o u flag in g defects, or facts, m ay
be found in the “ a n tiqu ing f u rn itu re ” cases in which the furniture
m a d e to a p p e a r a n tiq u e becom es “ a silent a s se rte r” .37 In such cases,

33 (1816), 1 Stark. 434; 171 E.R. 521.

34 Id., 171 E.R. 521.
35 (1851), 10 C.B. 591; 138 E.R. 234 at 238 (per Jervis C .J.)
36 Supra., n. 28, pp. 442-443.
37 Patterson v. Landsberg and Son ( >05), 7 F. (Ct. of Sess.) 675 at 681; Edgar v.
Hector, [1912] S.C. 348; See: '«wer and Turner, THE L A W OF A C ­
TIO N AB LE M ISR E P R E SE N T A T IO N supra, n. 17, p. 78.
62 U.N.B. L A W J O U R N A L

the person deceived has the n o r m a l rem edies available for ac tio n a b le
c o n c ea lm e n t.
(iii) Diverting The Buyer’s A ttention
A n y a t te m p t by the vendor to conceal the discovery o f defects,
o r o th e r m a te ria l facts by diverting his a tten tio n aw ay from the
defect co nstitutes an active con c ea lm e n t o r m is re p re s e n ta tio n .58 A
m o d e rn a p plica tion o f this p ractice might be th e use o f sub dued
lighting o r o f large m irro rs d esigned to ob scure vision o r inhibit close
inspection o f the goods being offered for sale. T his w ould seem to
m e e t the req u ire m e n ts laid dow n in Horsfall v. Thomas and o th e r
au th o ritie s th a t th e re be (1) d eliberate acts (2) intended to prevent
th e b u y e r’s discovery o f certain facts or defects (3) affecting the value
or quality o f the goods being sold and (4) which do in fact conceal
those defects fro m the buyer, thereby inducing him to e n te r into a
co n tra c t.
(iv) A voiding The Buyer's Suspicion
O ften th e seller will w ant to avoid raising the potential
p u r c h a s e r ’s suspicions by concealing his own identity as the vendor.
In Leeson v. D a r /o w 39 th e defe n d an t N ealy who was the sole
beneficial ow ner o f the p ro p erty offered for sale put title to the
p ro p e rty in the n a m e o f th e d efe n d an t D arlow in o rd e r to better
en able sale o f the property. This was a frau d u len t co n c e a lm e n t o f a
m a te ria l fact designed to induce th e p u rch a ser to en te r into a t r a n ­
saction which he would have otherw ise avoided o r which w ould have
at least affected th e price. It gives rise to an action for deceit.
In H epting v. S c h a a f 0 the S u p re m e C o u r t o f C a n a d a affirm ed
the u n re p o rte d ju d g m e n t o f the trial j u d g e w ho a w a rd e d d a m a g e s to
the p la in tiff for the d e f e n d a n t’s fra u d u len t m is re p re sen tatio n
im plied, inter alia, from the c o n c ea lm e n t o f th e fact no building p e r­
m it to build a suite on th e prem ises had been issued, thereby reducing
th e value o f the p ro p erty . T he re p o rt does n ot disclose w hat active
steps, if any, w ere ta ken to conceal th a t there was no building p e r ­
mit. It is, how ever, a n o th e r e x a m p le o f how active co n c e a lm e n t m a y
be used to avoid raising the vendee’s suspicions and fu rth e r th a t such
a co n c e a lm e n t is a frau d u len t m isre p re sen tatio n .
(v) False M arket
A n o th e r m e th o d o f c o n c ea lm e n t which co nstitutes a frau d u len t
m is re p re se n ta tio n is the device k now n as “ rigging the m a r k e t ’’ or
alternatively, “ m a k in g a m a r k e t ’’.41 It is used prim a rily to m is re p re ­

38 See: K E R R ON F RAU D S supra., n. 16, p. 49.

39 Supra., n. 22.
40 (1964), 43 D.L.R. (2d) 168 (S.C.C.).
41 See: Bower and Turner, supra, n. 17, pp. 220-222.
 U. N. B. L A W J O U R N A L 63
sent by im plication the value o f th e p ro p e rty offered for sale by m a k ­
ing the d e m a n d for it a p p e a r m uch g r e a te r th a n it is in fact. It can,
how ever, be used to conceal facts o th e r th a n the fair m a rk e t value or
d e m a n d . This m e th o d o f c o n c ea lm e n t has p ro b ab ly h ad its g rea test
use in share tran sa ctio n s. In S coff v. Brown, Doering, M cN ab and
C o.42 it was held that an a g re em e n t between two or m o re persons to
p u rch a se sha re s in a c o m p a n y to induce o th e rs to believe th a t there
was a far g re a te r value to the sh ares th a n actually existed was a fraud
on the persons so deceived.
III. TH E PO SITIVE ACT PREREQUISITE
W h e th e r th e con c ea lm e n t is bro u g h t a b o u t by (i) preventing an
e x a m in a tio n by the p u rcha ser, (ii) c a m o u flag in g the defect or
m a te ria l fact, (iii) diverting th e b u y er’s atten tio n , (iv) avoiding his
suspicions o r (v) creating a false m a rk e t, the c o m m o n th re a d running
t h r o u g h o u t the cases on actio n a b le c o n c ea lm e n t is the re quirem ent
for so m e positive, aggressive act o f c o n c ea lm e n t on the p a rt o f the
vendor. T h e only real chink in the a r m o u r was Hill v. G ray ,
alth o u g h th a t too is reconcilable.45 T h e im p o r ta n t and decisive ele­
m e n t is th a t o f the positive act because the o th e r required elem ents o f
fra u d u len t intent, deception a n d m ateria lity m a y all be im plied by
virtue o f the ac t. T o say, as did Jervis C .J. in Keates v. Cadogan 44
th a t the act m u st be “ aggressive” is misleading. A n y thing th a t goes
beyond m ere silence or m ere om ission will suffice to constitute an
“ active” c onc ea lm e nt.
A lternatively, the d isa ppointe d buyer m ight a rg u e th a t the m is­
ta k e or deception was such th a t there w as no consensus ad idem as to
th e identity o f the subject m a tte r or o th e r m a teria l term . P r o o f o f
the v e n d o r ’s active co n c e a lm e n t is not essential to such an a r g u ­
m e n t4'. If there is no consensus ad idem , there is no co n tra ct. Lord
A tk in however, said th a t a m is ta k e as to quality will not affect assent
unless (1) it is the m istak e o f both parties a n d (2) “ is as to the ex ­
istence o f som e quality which m a k es th e thing w ithout the quality es­
sentially different from the thing as it was believed to b e.” 4h
T he fine line between active c o n c ea lm e n t and m ere n o n ­
disclosure is best exemplified in Schneider v. H eath , the facts o f

42 [18921 2 Q.B. 724 (C.A.). See also: N A T IO N A L E XC H AN G E CO OF

Glasgow v. Drew (1855), 2 Macq. H.L. 103 and R. v. Deherenger (1814), 3 M. &
S. 67; 105 E.R. 536.
43 See supra, at pp. 12, 13.
44 Supra., n. 35 at 138 E.R. 238.
45 Cundy v. Lindsay 3 A.C. 459; Smith v. Hughes (1871) L.R. 6 Q.B. 605; London
Holeproof Hosiery Co. Ltd. v. Padmore (1928), 44 T .L .R . 499 (Eng. C.A.);
Scriven Bros. A Co. v. Hindley & Co. [1913] 3 K.B. 564.
46 Bell v. Lever Brothers. Ltd., [1932J A.C. 161, 218 (H.L.).
64 U. N. B. L A W J O U R N A L

which w ere discussed supra, an d Ward v. Hobbs*1. In Ward v.

H obbs th e d efe n d an t sold pigs “ with all fau lts” in a m a r k e t know ing
th a t they were infected with typhoid. T h e P laintiff pu rch a sed the
pigs and, upon discovering the typhoid, sued the p laintiff claim ing
c o m p e n sa tio n . T h e H o u se o f L ords said there w as n o d u ty on the
d e f e n d a n t to disclose the existence o f th e ty p hoid even thou gh the
h ea lth inspector at the m a r k e t h ad declared the pigs to be sound. By
p u ttin g the pigs up for sale at the m a rk e t, know ing all the while o f
the co n ta g io u s disease a n d o f the health in sp e cto r’s e r ro r, the defen­
d a n t h ad still c o m m itte d no positive act o f deceit. C on seq u en tly the
pla in tiff was w itho ut rem edy. H ow ever, in the a n a la g o u s Schneider
c ase th e re was an ad ditiona l factor: the d efe n d an t took the b o a t
fro m the dry d ock after realizing the con dition o f its hull a n d put it in
the w a te r to avoid inspection by prospective purchasers. It was on
this fact th a t the case hinged. I f the b o a t had been in the w ate r all
a long and if the vendor had so m e oth e r m e an s w hereby he knew o f
th e con dition o f the b o a t ’s b o tto m , the p u rch a ser w ould have been
left w ithout a rem edy.
It is interesting to note th a t in light o f R v to w Marine** both
W ard v. H obbs a n d Schneider v. Heath m ight be decided in favour
o f th e p u rcha ser to d a y on the g ro und th a t the concealed defects
th r e a te n e d the physical safety o f the pu rchasers. T h e P lain tiff
w ould, however, be restricted to d a m a g e s a t tr ib u ta b le to breach o f
the d u ty to w arn which m a y , in an a p p r o p r ia te case, include
e c o n o m ic loss. O f co urse this a rg u m e n t is o f no avail where the
g o o d s sold present no th rea t o f physical h a r m a n d the defect or fact
co n c ea le d affects only the value or quality o f those goods. T h erefore
R ivto w M arine w ould not be arg u a b le in A m es v. Investo-Plan et al49
w here, in selling trea sury shares in the P e r fo r m a n c e Plus F u n d Ltd.,
it w as not disclosed th a t the p rospectus o f the c o m p a n y had never
been ap pro ved by the S ecurities C o m m issio n o f British C o lu m b ia .
S ince th e re was neither sta tu to r y relief available to the plaintiff nor
any active c o n c ea lm e n t by the defe n d an t, the British C o lu m b ia
C o u r t o f A ppeal affirm ed the validity o f the tran sa ctio n .
O n e interesting d e p a r tu re from the n o rm a l positive act require­
m e n t is in the are a o f frau d u len t co n c e a lm e n t o f a cause o f action. In
A pplegate v. M oss 50 a n d King v. Victor Parsons & C o .51 the English
C o u r t o f A pp eal has espoused a d o ctrin e o f “ eq uitable f r a u d ” . If the
d e fe n d a n t is aw a re th a t the p la intiff has a cause o f action against him

47 (1878), 4 A.C. 13 (H .L.).

48 (1974) S.C.R . 1189 (S.C.C.).
49 (1973) 35 D.L.R. (3d) 613 (B.C.C.A.).
50 [1971] I Q B 406 (Eng. C.A.)
51 [1973] I W .L.R. 28 (Eng. C.A.).
 U. N. B. L A W J O U R N A L 65
for breach o f c o n tra c t and he does n ot disclose th a t fact to the pla in ­
tiff, the d efe n d a n t is guilty o f a fra u d u le n t c o n c ea lm e n t w hereby the
English Lim itations A c t stip ulates th a t the six y ea r lim itation period
will not begin to run ag ainst the plaintiff until he discovers the
b reach o f co n tra ct. W hile these cases form an interesting c o n tra s t to
the c o m m o n law c o n c e a lm e n t rules, their a p plica tion is lim ited to
disclosure o f breaches o f te rm s o f existing con tra cts. T h e n o n ­
disclosure does not give rise to any rights an d liabilities; r a th e r it ex­
tend s a lre a d y existing rights a n d liabilities. T h ey have no p a r t in the
n ego tiation o f co n tra cts.
IV. REM EDIES
A. DAM AGES
D am a g es are available to the victim o f a seller’s fraudulent c o n ­
c e alm en t. D am a g e s are recoverable for:
(i) pecuniary loss;
(ii) personal injury;
(iii) pro p erty d a m a g e or loss.
A claim for d a m a g e s for active c o n c e a lm e n t is founded in the to r t o f
deceit. D am a g es for pecuniary loss th erefo re do no t rew ard the ex­
p ec ta tion interest. T h e philosophy behind d a m a g e a w a rd s in tort
claim is to put the plaintiff in the position he would be in had the
fra u d u len t m isre p re sentation by m e an s o f con c ea lm e n t not been
m a d e . 52 T he m e asu re o f d a m a g e s is the difference between th e
purch a se price actually paid by the P lain tiff and the value o f the
p ro p erty at the tim e o f the sale.
T h e failure to c o m p e n sa te the p u r c h a s e r ’s ex pectation interest
can be o f considerable significance. Parna et al v. G A S . Proper ties
Ltd. et a li} is an ex a m p le o f such an instance. In the Parna case, the
plaintiffs paid $251,000 for p ro p erty , the net ann u a l incom e on
which the d efe n d an t ven dor fraudu lently represented to be $24,193,
or an a n n u a l yield o f 9.6% on the ac tu a l p urchase price. In fact, the
net an n u a l incom e o f the pro p erty was only $21,807. T h e trial judge,
in assessing th e d am ag e s, d e term in e d the a m o u n t o f capital which at
9.6% w ould yield a net ann u a l inco m e o f $21,807. H e found it to be
$226,210. H e then gave the plaintiffs ju d g m e n t for the difference
between $251,000 (the a m o u n t paid) a n d $226,210; in o th e r words,
$24,790. O n appeal, the ju d g m e n t was varied and th e plaintiff
a w a rd e d only the reduced sum o f $4,000. Evans J.A . said that the

52 John G. Fleming, THE LA W OF TO RTS (Australia: The Law Book Co., 1971 )
pp. 560-561. See also: Parna et al. v. G. & S. Properties Ltd. et at (1969), 5
D.L.R. (3d) 315, at 317 (Ont. C.A.; Hepting et al v. SchaaJ, [ 1964J S.C.R. 100
(S.C.C.).
53 (1969). 5 D.L.R. (3d) 315 (Ont. C.A .) (per Evans J.A.).
66 U.N.B. L A W J O U R N A L

trial ju d g e had erred by m e asu rin g d a m a g e s as th e difference

between the price a c tua lly paid and w hat would have been the value
if the r ep rese n tatio n s had been true. In an action for deceit, the
plaintiffs a re not entitled to the loss o f their bargain, unless they can
establish a breach o f warranty.
T h e following hypothetical provides a n o th e r illustration o f the
refusal o f the C o u r ts to c o m p e n sa te the p u r c h a se r ’s ex p ectation in­
terest in deceit actions arising out o f an active concealm ent: S u p ­
pose A buys from B a valuable china vase, paying $1,000 therefor.
H ow ever, the vase has a serious cra ck which B conceals by the use of
glue. Because o f the c ra ck , the actual value o f the vase is only $700.
W hen he b oug ht the vase, A had a prospective p u rch a ser, C , who
was willing to pay $1400 for it. C, however, discovers th e c ra ck and
will not ta k e the vase. A sues B in deceit for actively concealing the
defect:
If Expectation Interest If R e stitutio n Interest
C o m p e n sa te d : C o m p e n sa te d :

V alue o f Vase w ithout P u rc h ase Price ($1000)

Crack ($1400) Less: value o f vase ($ 700)
Less:A ctual value o f
V ase with c ra ck ($ 700)
Equal: A ’s d a m a g e s ($ 700) Equals: A ’s d a m a g e s ($ 300)
In an action for deceit, A will recover only $300. T o be entitled
to $700, A will have to establish a breach o f w a r ra n ty o r condition.
T h e re fo re when acting on b e h a lf o f a p urchaser, a solicitor should
alw ays be conscious o f the difference between the value o f the expec­
ta tio n a n d restitu tio n interests, and, where significant, a t te m p t to es­
tablish an im plied te rm un d er the Sale o f Goods A c t, or an express
co ndition or w a r ra n ty related to the quality o f th e goods.
Besides d a m a g e s for pecuniary loss, relief m a y be gran te d for
any personal injury suffered as a result o f the defect fraudulently
concealed by the V endor. T h e O n ta r io C o u r t o f A p p ea l in Graham
v. Saville -4 c o n c u rre d in Lord W e n sle y d ale’s opinion expressed in
Sm ith v. K a y 55 th a t the “ only d a m a g e s o f which the law tak es
cognizance [...in a deceit action...] is ac tu a l and te m p o r a l d a m a g e -
th a t is, som e loss either o f m oney or m o n e y ’s w orth, or so m e
physical injury, c a p ab le o f being pecuniarily c o m p e n s a te d ...“ .
D a m a g e s are th e re fo re recoverable for physical injury, including
pain and suffering.

54 [1945] 2 D.L.R. 489 (Ont. C.A.) per Roach J.A ., See also: H arry Street. 77ie Law
o f Torts (London: Butterworths, 1972), 5th ed., p. 375.
55 (1858), 7 H.L.C. 750 at 775, 11 E.R. 309.
 U. N.B. L A W J O U R N A L 67

R e su lta n t pro p erty d a m a g e is also recoverable in an actio n for

deceit. In M ullett v. M ason 56 the defe n d an t seller fraudulently m is­
represented th a t a cow was free from disease. T he disease spread
from the infected cow, killing five o th e r cows. T he P laintiff sued
successfully for the loss o f the five o th e r infected cows.
E x em p lary d a m a g e s are not n o rm ally allowed in a deceit a c ­
t i o n . '7
B. R E S C IS S IO N
It is a m a x im th a t fraud vitiates everything. A ccordingly, the
defrau d e d p u rch a ser is generally entitled not only to his d a m a g e s,
b ut also to rescind a c o n t ra c t induced by fraud. T h e con tra ct re­
m ains valid until rescinded, unless the m istake was so fu ndam e ntal
th a t there was no consensus ad idem. In the latter, and exceedingly
rare, instance the c o n tra c t is void.58 N o rm a lly , therefore, the
pu rch a ser m u st elect to affirm or avoid the co n tra ct. An election is
irrevocable. F u rth e rm o re , a ffirm atio n m ay be inferred by conduct
upon discovery of the f ra u d .5’ Such was the result in Leeson v.
Darlowb0 w here the plaintiff by her dealings with the property after
learning o f th e d e f e n d a n t’s frau d u len t co ncealm ent, and by her
delay, was held to have affirm ed the co ntract. She was therefore
restricted to a claim for d am ag e s. O nce the c o n tra ct is affirm ed, the
right to avoid it is extinguished.
T he right to rescind is also dep endent upon the possibility o f
restitutio in integrum. A t c o m m o n law, there could be no rescission
unless there could be com p lete resto ra tio n in specie o f the status quo
ante. N o allow ance w ould be m a de for such exigencies as d e p re cia­
tion. T he c o u rts o f equity relaxed these stringent c o m m o n law rules.
As a result, d epre cia tion and oth er exigencies are the subject o f c o n ­
sequential o rders and, in the interest o f justice, restitutio in integrum
is required only so far as it is practically possible.M If the Plaintiff
c a n n o t return the pro p erty to the d efe n d an t in the sam e state, the
defe n d an t will at least receive m oney value as co m p en sa tio n .
Equ itable relief is o f co urse d iscretionary.

56 (1866), L.R. I C.P. 559.

57 John G. Fleming, The Law o f Torts (Australia: The Law Book Company, 1971)
pp. 560-561.
58 Cundy v. Lindsay (1878), 3 A.C. 459.
59 United Shoe Co. v. Brunei [1909] A.C. 330.
60 (1926), 59 O .L.R . 421; [1926] 4 D.L.R. 415 (Ont. C.A.).
61 Erlanger v. New Sombrero Phosphate Co. (1878), 3 A.C. 1218 (H.L.); See
generally, Cheshire and Fifoot, The Law o f Contract (London: Butterworths,
1969), 7th ed.. pp. 249-252.
68 U. N. B. L A W J O U R N A L

PART TW O:
REFORM OF TH E COM M ON LAW OF CONCEALM ENT:
A DUTY OF DISCLO SURE
V. D ISCLO SURE OF KNOWN M ATERIAL DEFECTS
T he curious and rath e r a r b itra ry distinction between m ere
silence a n d active conc ea lm e nt begs the sim ple question: “ W h y ?” .
T he v end or scarcely seems less m orally b lam ew orthy because he a c ­
quiesces in the bu y er’s m istaken belief. In either instance, he is t a k ­
ing an u nfair a d v a n ta g e o f an unsuspecting buyer. O n e m a y also
question why the co u rts have moved only so far as to im pose a duty
to disclose those defects which end a n g er the user’s safety. S hould
this trend not be extended to include all defects, even those affecting
quality. Finally, it rem ains to be considered why quality-related
defects are not at least t a n ta m o u n t to a breach of such o f the implied
conditions as fitness for purpose.62
T h e m a x im caveat e m p to r d e v e lo p e d b e c a u s e o f th e
ac know ledged need for c e rtainty to govern the day to day affairs and
dealings o f businessm en. It is essential to both parties in the
b argaining process th a t identifiable rights and duties be created.
A ny o th e r system would be intolerable a n d unm a n ag e ab le . T he
c ou rts are relu ctan t therefore to interfere in either the bargaining
process o r the final co n tra ct. P arties should be free to c o n tra c t their
own te rm s. A tkin L .J. expressed this se ntim e nt in Bell v. Lever
Brothers Limited:"'
...Nothing is more dangerous than to allow oneself liberty to construct for
the parties contracts which they have not in term s made by importing
implications which would appear to make the contract more businesslike or
more just...
and later:
...Nevertheless it is of greater importance that well established principles of
contract should be maintained than that a particular hardship should be
redressed...
Bramwell B. said it would be “ m ischievous” if the seller were:
...bound to point out everything which might by any possibility be con­
sidered a defect; and the consequence would be that if the m anufacturer, for
prudence sake, pointed out some flaw which made no difference whatever in
the value of the article, the purchaser would immediately say, 'There is a
defect, I must have an abatem ent of the price'....64
Such opinions are not w ithout considerable merit. It would be in­
conceivable th at a seller should be obliged to point out every single
defect o r flaw. Such a sta n d a rd would be th orough ly subjective and

62 S A L E OF GOODS A C T R.S.N.B. 1973, c. S -l, S. 15(a).

63 [1932] A.C. 161 at 226 and 229 (H.L.).
64 Hors/all et al v. Thomas (1862), 1 H. & C. 90, 158 E.R. 813 at 817.
 U. N. B. L A W J O U R N A L 69
grossly unfair. N o v endor should be left so unp ro tec ted th a t he is not
able to oblige a p urch a ser to accept responsibility for faults which to
a rea sonable m a n with average intelligence would have been readily
a p p a r e n t upon inspection, so long as nothing was done to hinder th a t
inspection o f the property. It is sub m itte d , however, th a t where
there are (1) m a jo r defects affecting quality; (2) o f which the vendor
is a w a re (3) a t the tim e the c o n tra c t is m a de, oth e r principles ought
to be considered. In all the cases where active co ncealm ent was held
to be fra udu lent, these three factors were present. In all instances
the defects w ere such tha t, had the pu rch a ser been a w a re o f the ex­
isting defects, he would not have entered into the c o n tra c t o r a lte r ­
natively, would have done so at a greatly reduced price. If any o f
these th ree requisites (m ateriality, know ledge, and pre-existence)
were lacking, the p urchaser would not have successfully proven c o n ­
cealm ent.
H ow ever, in c reating the rules related to active c onc ea lm e nt, the
co urts have perh aps m istakenly over-em phasized the infringem ent o f
the right to inspect. A s a result, we have arrived at this a rb itra ry dis­
tinction between active c o n c ea lm e n t an d m ere non-disclosure. T he
elem ents o f unconscionability, so im p o r ta n t to the result, have been
overlooked in providing reasons for that result. Recognition should
be given to a concept whereby know ledge affects the passing o f the
risk to the b uyer. If a choice has to be m a d e between an im m o ra l
and u n sc rupulou s vendor and a reckless, and p erha ps naive,
purchaser, surely the risk should fall to the individual guilty o f sh a rp
an d u ncon scio na ble conduct whenever the defect is o f m o re than
m inim al significance.
O f course, the m o re significant the defect m ust be before there
is a duty to disclose its existence, the g re a te r the chance th a t a court
would be able to fit it into one o f the implied te rm s o f the Sale o f
Goods A ct. H ow ever, it is undesirable th a t a p urcha ser should be
obliged to prove an implied term in all such cases. If the Sale o f
Goods A ct is relied upon, a vendor with a superior bargainin g posi­
tion w ho has intentionally ta k en a d v a n ta g e o f the w eaker party m ay
be able to c o n tra c t out o f an im plied te rm by a properly w orded ex­
clusionary clause. F u rth e rm o re , the im plied te rm s o f the Sale o f
Goods A c t apply only to dealers. It does not m a k e sense th a t a duty
o f disclosure o r a doctrine o f unconscionability should be lim ited to a
vendor acting in the course o f his business. It should apply equally to
private sales.
This p ro p o sed duty o f disclosure is not as bro ad as the duty to
w arn im po sed by R ivtow Marine. T h ere the du ty is to w arn of
defects which en d a n g er the u se r’s personal safety. T he duty c o n ­
tinues even afte r risk has passed to the buyer. T he reason for such a
d uty is the overriding public interest in its own personal security. In
 70 U.M.B. L A W J O U R N A L

th e n o r m a l c o n tra c t situation, th ere is no reason to co n tin u e the duty

o f disclosure once property, and th erefore risk, have passed to the
buyer. T h e R ivtow M arine case seeks to protect an entirely different
interest. T h e v en d o r’s know ledge at the tim e o f b arg a in in g is irrele­
vant in R ivtow . T h e reason for im posing a duty to disclose known
m a te ria l defects in everyday c o n tra c ts is to introduce a degree o f
conscionability a n d fairness into the b arga in ing process, not to
protec t o n e ’s personal safety. T h e bargaining is over when the c o n ­
tr a c t is m a de. N o t only would a policy that required disclosure after
risk had passed be unreasonably harsh, it would be im possible to a d ­
minister. If the buyer wishes such protection, he should procure
specific assurances from his seller.
If a duty to disclose k now n m a jo r defects is to be im posed, a test
m ust then be found for m e asuring the significance o f defects. Its
sta n d a r d m ust be objective. O n e possible test is w hether o r not the
defect is such that it renders the good unfit for the purpose for which
it was intended to be put. Such a test would catch the dry rot on the
ship’s keel in Schneider v. H eath , the typhoid infected pigs in Ward
v. H obbs , the d ila pida ted te nem en t house in Leeson v. Darlow and
A b el v. M acDonald, the faulty ca n n o n in Horsfall v. Thomas, the
hole in the m a h o g a n y log in Udell v. A therton , the se a-d a m a g e d
p im e n to in Jones v. Bowden , the “ a n t iq u e d ” furniture in Patterson v.
Landsberg and Son, and the p h ony painting in H ill v. Gray. An
obligation to disclose such defects w ould im pose no gre a te r h ard sh ip
on the vendor who is aw a re o f the defect th a n is already im posed by
the c o m m o n law rule not to conceal such defects. T h e vendor is no
less m orally bla m ew o rth y by virtue o f his silence.
It m ight be felt th a t a fitness for p urpose test is too strict.
P e rh a p s the co u rt should be given flexibility to im pose disclosure re­
q u irem en ts where the fact not disclosed is m a jo r alth ough not so
significant as to affect its fitness for purpose. If such is the case, the
test m ight be w hether a reaso nable p urchaser, aw a re o f the defects,
would have entered into the tra n sa c tio n at all, or w hether he would
have d on e so only at a greatly reduced price. T h e d raw b ac k to such
a test is its im precision and u n certainty . H ow m uch lower would the
fair value o f the goods have to be before a court could say with any
ce rtain ty that the buyer would have entered into the tra n sa c tio n only
at a m uch lower price. A fitness for purpo se test clearly affects only
m a jo r defects an d , if liberally c o nstru e d, should catch m o st cases o f
injustice. O n the oth e r hand, the second test covers a m uch b ro ad e r
rang e o f tran sa ctio n s th a n does fitness for purpose. F o r exam ple,
the fitness for pu rp o se test does not catch the b la ta n t abu se m a d e of
suggestive selling te chniques by m a n y fast food franchisers who
know th a t the co n su m er is confused or misled as to w h at foods are
included in each item o f their m enu. T h e c o n s u m e r still gets food
ca p ab le o f con su m p tio n , but if he had been aw a re o f w h at he would
 U.N.B. L A W J O U R N A L 71
receive, he m ight not have ord ered as he did. T his is the g reat a d v a n ­
tage o f the test which objectively determ in e s w hether or not the fully
inform ed b uyer would have entered into the tra n sa c tio n , and if so,
only at a greatly reduced price.
T h e rem edy available to the p urcha ser should also be c o n ­
sidered at this juncture. If a duty to disclose is imposed and breached,
w hat should the b u y e r’s rem edy be at c o m m o n law? C learly he
should be allowed to rescind the co n tra ct, because in the vast m a ­
jo rity o f cases he would never have entered into it had he been m a d e
fully a w a re o f the facts. As for d am ag e s, the question m ay fairly be
asked w heth er the buyer should be lim ited to the restitution interest.
Is the action not sufficiently p r o x im a te to one in co n tra c t as to enti­
tle the aggrieved p urch a ser to c o m p e n sa tio n for loss o f his ex p e c ta ­
tion interest? It seems a bit unjust th a t the rem edy should depend
upon the m a n n e r in which the action is fram ed. If the p urcha ser
could som e how establish an im plied or express te rm that the goods
are free from quality related defects, then he is entitled to sue on the
c o n tra c t and claim d a m a g e s to his expectation interest. F u rth e r ­
m ore, the v en d o r’s m o ra l tu rp itu d e should be a factor in c o m p e n ­
sating the p urch a ser to the full extent o f his loss. T he possibility o f a
large d a m a g e aw a rd m a y serve as a d eterre n t to unconscionable sell­
ing practices.
T he right o f the vendee to rescind the c o n tra c t and to claim
d a m a g e s for the ven d o r’s con c ea lm e n t or non-disclosure o f known
m a te ria l facts m ight fairly be te m p ered by allowing the vendor the
right to ta k e back the goods, re-tendering the sa m e or sim ilar goods
within a rea so n ab le tim e. T he re-tendered goods w ould have to be of
the quality a nticipate d by the pu rch a ser a t the tim e he entered into
the co n tra c t. Such a right w ould cause no injustice to the buyer
because he would still receive w hat he had originally b arg a in ed for
under the con tra ct.
VI. OTHER SO LU TIO N S
A. IN T R O D U C T IO N
T h ere are oth e r possible arg u m e n ts which m ay be adv anced on
behalf o f a p u rcha ser who falls prey to the sh a rp tactics o f a seller:
(1) so m e scholars suggest th a t courts resolve a na logous problem s by
w hat is know n as the c o n d u c tio n a p p ro a ch . (2) O f course, the
implied te rm s o f the Sale o f Goods A ct are always a possible solu­
tion. (3) T h e A m e ric a n courts have a d o p te d a th ird ap p ro a c h ,
know n as the d o ctrine o f fraud.
B. TH E C O N S T R U C T IO N A P P R O A C H
M a n y injustices in co n tra c ts are avoided by trea tin g the
p roblem s as one o f offer and acceptance. P.S. A tiyah is an advocate
 72 U. N.B. L A W J O U R N A L

o f the co n struc tion a p p r o a c h 65. If a m is ta k e is so f u n d am e n tal, a

w a r ra n ty will be implied. A vendor who accepts a p u r c h a se r ’s offer,
kn ow ing o f the l a tte r ’s m istaken belief, m ay be b ou nd to tr e a t the of­
fer as thou gh the goods were o f the condition o r quality believed by
the purchaser.
A . R oberts & Co. v. Leicestershire County Council is an
a n a lo g o u s case in p o int.66 In th a t case, the plaintiff te n dered for the
co n stru c tio n o f a new building to be com p leted in eighteen m onths.
T h e D efendant accepted the p la in tif f s tender, but in th e form al c o n ­
tr a c t ch anged the te rm to thirty m o nths. T h e P laintiff executed the
c o n tra c t w ithou t noticing the change. T he d efe n d a n t knew o f the
p la in tif f s m istak e n believe and the c o u rt allowed rectification o f the
form al c o n tra c t to c o n fo rm to the p la in tif f s u ndersta n d in g o f the
original term s. Professor A tiyah q uite properly cites the R oberts
decision as lending su p p o rt to his view th a t “ ...a person who accepts
an offer know ing the real intentions o f the offeror is bound to trea t
th a t offer as thoug h it correctly stated the o f fe ro r’s intentions,
w h atev er the objective co nstru c tion o f the offer m ight be” .67 It o f
co u rse rem a ins to be seen if the c o u rts will extend the Roberts deci­
sion into the a r e a o f q uality-related defects know n to the vendor.
T he constru c tio n a p p ro a ch has the ad v a n ta g e o f adding a
degree o f flexibility to the law. It w ould, however, be preferable if
th e re were a consistent and logical d e ve lopm e n t o f the law related to
co n c e a lm e n t into the a re a o f failure to disclose when the buyer is o b ­
viously labouring under a deceptive belief as to the g oods.68 T h e test
o f course, should be an objective one such th a t the b u y er’s m istaken
belief would be sha re d by a rea so n ab le m a n and would further be a p ­
p a re n t to a rea so nable vendor. O th e r sh o rtcom ings o f the c o n s tru c ­
tion a p p ro a c h is its uncertainty and artificiality. T he prospects o f
p ersua din g the co u rt th a t the q u ality-re la ted defect is sufficiently
fu n d a m e n ta l or m a teria l as to c o nstitute a te rm o f the c o n tra c t
would in a m ajority o f instances be ra th e r slim. If the court finds
th a t the m is ta k e was one as to quality alone and th a t it was not a
te rm o f the co n tra c t, the m a x im caveat em ptor will leave the buyer
w ith out a remedy. T he advisability o f leaving this problem to such
judicial creativity is q uestionable at best.

65 P S . Atiyah, JU D IC IAL TECH NIQ UES A N D THE ENG LISH L A W OF

C O N T R A C T (1968), 2 O ttaw a L. Rev. 337, at 344-350.
66 [1961] Ch. 555.
67 Supra., n. 65 at p. 348.
68 This is the approach used by many common law American jurisdictions under the
doctrine of fraud. See infra, at p. 38.
 U. N. B. L A W J O U R N A L 73

C. IM P L IE D T E R M S
(i) Goods To Correspond With Description.
S o m e relief for the p u rch a ser m a y be found in the im plied te rm s
o f the Sale o f G oods A c t ,69 especially m e rc h an ta b ility (section 15
(b)) and fitness for p urpose (section 15 (a)). Section 14, which
implies a con dition th a t the goods sold by description shall co rres­
pond with the description, is o f little c o m fo r t where the defect is
related only to quality. It is unlikely that the quality related defect
will be so great as to affect the identity o f the goods offered for sale.
H ow ever, once it has been show n th a t the goods do not co rresp o n d
with the description , the im plied condition o f co n fo rm ity is thereby
b reached regardless o f how insignificant the variation. T h e initial,
an d usually fatal, hurdle is to show that the article purchased is not
in fact the article d escrib ed.70 T h e req u irem en t that there be a sale
by description is easily met despite th a t the buyer saw a n d exam ined
th e goods before m a k in g the c o n tra c t if the deviation from d escrip ­
tion is not a p p a r e n t.71 Even an o v er-the-co unter t ran sa ctio n has been
tr e a te d as a sale by d es c rip tio n 72. G enerally, it is true to say th a t the
only case o f a sale not being by description occurs w here the buyer
m a k e s it clear th a t he is buying a p articu la r thing because o f its uni­
que qualities and th a t no oth e r will do.
(ii) M erchantability.
T h e c o n s u m e r ’s greatest friend is p robably found in the
m e rc h a n ta b ility rule o f section 15 (b). It states goods m ust be o f
m e rc h a n ta b le quality if:
(1) they are b ought by description,
(2) from a seller who deals in goods o f th a t description.
T he second req u irem en t thereby rules out all private tr a n s a c ­
tions. V arious definitions have been a tta c h e d to “ m e rc h a n ta b le
q u a lity ’’. Farwell L .J. described m e rc h an ta b ility in the following
terms:
...if article of such a quality that a reasonable man acting reasonably would
after a full examination accept it under the circumstances of the case in per­
formance of his offer to buy that article whether he buys for his own use or
sell again...73

69 R.S.N.B. 1973 c. S -l.

70 Arcos Ltd. v. E.A. Ronaasen and Son. [1933] A.C. 470, [ 1933J All E.R. 646
(H.L.).
71 Beale v. Taylor [1967] I W .L.R. 1193.
72 Godley v. Perry, [1960] I W .L.R. 9. However, see Godsoe v. Beatty (1958), 19
D.L.R. (2d) 265 (N .B.C.A .) which leaves the situation in New Brunswick very un­
settled; and Peters v. Parkway Mercury Sales Limited (1975), 10 N .B .R. (2d) 703.
73 Bristol Tramways Co., Ltd. v. Fiat Motors Ltd. [1910] 2 K B . 831 at 841.
74 U. N. B. L A W J O U R N A L

L ord W right in Grant v. Australian K nitting M ills 74 said m e r c h a n ­

tability a m o u n te d to fitness for the general purp o se for which the
goods a r e used. This la tte r definition w ould exclude m in o r defects
which do not affect th e useability o f the good. T he H o u se o f L ords
in H enry Kendall and Sons v. William Lillico and Sons L td .1' said
g oods are o f m e rc h a n ta b le quality if the buyer
...fully acquainted with the facts and, therefore, knowing what hidden
defects exist and not being limited to their apparent condition would buy
them without abatem ent of the price obtainable for such goods if in
reasonably sound order and condition and without special terms....
W hile it is not within th e scope o f this p a p e r to e m b a r k on a detailed
e x a m in a tio n o f m e rc h a n ta b ility , it is clea r from the above definitions
th a t m erch an ta b ility is not a settled concept. All defects a re not
ca u g h t by it. It is a d o c trin e which relates m o re to useability and,
consequently, m a ny defects will not re n d e r the goods u n m e rc h a n ­
ta b le.76 As in the case o f Sm ith v. Hughes m uch will depend upon the
description by which th e goods were purchased.
(iii) Fitness For Purpose
T he fitness for p u rp o se d octrin e m a y also be used to the a d v a n ­
ta ge o f a buyer who, to the seller’s know legde, has purchased goods
un der som e m istaken belief as to their quality or o th e r m a teria l fact.
Section 15(a) o f the Sale o f Goods A c t states th a t where the buyer,
expressly or by im plica tio n, m a k es know n to the seller the p articu la r
pu rp o se for which the go ods are requ ired so as to show his reliance
on the seller’s skill or ju d g m e n t, there is an implied condition that
the goods shall be fit for such purpose. As with the m erch an ta b ility
rule, the vendor m ust be a dealer in g oods o f th a t description.
R eliance is not difficult to prove because where goods are n orm ally
used for one purpose, the seller will be ta k e n to know the purpose in
the absence o f a c o n t r a r y indication by the b u y e r.77 F u rth e rm o re ,
substantial, not sole, reliance is all th a t is r e q u ir e d .78 Section 15(a)
does not apply where th e sale was o f an article purch ased u nder its
p a te n t or other tra d e nam e.

74 [1936] A.C. 85.

75 [1969] 2 A.C. 31 (H L.).
76 For a further discussion on the question of m erchantability, see: P.S. Atiyah, The
Sale o f Goods (Toronto: Carswell Co. Ltd., 1971) 4th ed., pp. 80-85; O ntario Law
Reform Commission, Report On Consumer Warranties and Guarantees in the
Sale o f Goods (Ontario: Department of Justice, 1972), pp. 36-41; K.J. Dorè, First
Report o f the Consumer Protection Project (New Brunswick, Departm ent of
Justice, 1974) pp. 69-90.
77 Grant v. Australian Knitting Mills [1936] A.C. 85 (per Lord Wright).
78 Freeman et al v. Consolidated Motors Ltd. (1968), 69 D.L.R. (2d) 581 (M an.
Q B ).
 U.N.B. L A W J O U R N A L 75

(iv) Conclusion.
M a n y instances o f quality -re la ted defects will not be sufficient
to ren d e r them unfit for th eir p articu la r purpose.
M e rc h a n ta b ility is m o r e likely to be o f assistance to th e buyer.
Fitness for p u rpo se does, however, provide an o p p o r tu n ity for a
co u rt o r ju d g e to avoid an unjust result if active co n c e a lm e n t c a n n o t
be established, w hereby the m a x im cavaet e m p to r w ould otherw ise
be applied again st the purch aser. T h e m a jo r prob lem s co n fro n tin g a
p u rch a ser seeking to apply the im plied c ond itions o f m e rc h an ta b ility
an d fitness for p u rp o se are:
(1) p r o o f o f sale by description;
(2) the d ealer requirem ent;
(3) the vagueness o f the applicability o f the te rm s themselves;
(4) the u nce rtainty w hether the defect o f quality is sufficient to
render the goods unfit for purposes or u n m e rc h a n ta b le .
D. TH E D O C T R IN E OF FRA UD.
T h e positive act o f c o n c e a lm e n t is a fra u d u len t m is re p re se n ta ­
tion th a t the goo ds a r e o f the condition a n d quality th a t they a p p e a r
ex facie to be. If an act can c o n stitute a m is re p re se n ta tio n , so too
should silence in a p p r o p r ia te situations. In o th e r a re a s o f to rt law,
an om ission to act can a m o u n t to a brea ch o f duty with resultant
liability. “ M is re p re s e n ta tio n ” is an u n f o rtu n a te label to apply to
such c o n d u c t by the vendor. It is a m is n o m e r a n d m a y o f itself be
responsible for r e ta rd in g the expansion o f c o n c ea lm e n t rules into the
ar e a o f non-disclosure.
T h e failure to im pose a d u ty to speak when it is rea so nably a p ­
p a r e n t th a t the p u rch a ser is la bouring un d er a deceptive belief
a m o u n ts to a licence to ta k e unfair a d v a n ta g e o f others. It is really a
fraud on the buyer. “ F r a u d ” would be a m o re a p p r o p r ia te te rm th a n
“ m is re p re s e n ta tio n ” an d w ould be m o re conducive to exp a nsion o f
its rules into the a re a o f non-disclosure. Such has been the ex­
perience in m ost A m e r ic a n jurisdictions. T o extend frau d u len t c o n ­
ce a lm e n t into the a r e a o f non-disclosures would not m e a n th a t the
vendor thereb y loses his right to secure th e best possible bargain . It
w ould not sanction the b u y e r’s recklessness. It m e ans only that the
seller shall be b ound by the lim its of reaso nableness, fairness and
honesty. Indeed, p r o o f o f the v e n d o r’s fraud would be m o re difficult
given the absence o f any positive act o f co n c e a lm e n t and would c o n ­
sequently afford so m e m e a su re o f p rotec tion to the vendor.
T h e A m e r ic a n a p p r o a c h , although sim ilar in m a n y respects, has
differed from th a t o f C a n a d i a n a n d English courts in one im p o r ta n t
area; nam ely, the d uty to disclose. T h e distinction between m ere
silence a n d active co n c e a lm e n t by som e trick o r contrivance also ex­
 76 U. N. B. L A W J O U R N A L

ists in the c o m m o n law o f the U n ite d S ta te s .79 T h e r e is no d u ty to

speak even when it is a p p a r e n t th a t the p u rc h a se r is m is ta k e n so long
as it is a m a tte r on which either p a rty m a y exercise his independent
ju d g m e n t. 80 U n lik e C a n a d a or G re a t Britain, how ever, m ost
A m e ric a n co u rts im pose an obligation o f full disclosure whenever
fair con duct d e m a n d s it.81 F a ir c ond uc t no rm ally req uires disclosure
when the ven dor possesses special know ledge which affects th e value
or desirability o f the p ro p e rty or g oods offered for sale a n d the
vendee has no such know ledge an d no r ea so n ab le m e an s o f acq uiring
such know ledg e.82 In Jenkins v. M cC orm ick the following p ro p o si­
tion is expounded:
Where parties deal at arm ’s length and their relations are not confidential,
silence is not fraud, especially where facts are equally within means of
knowledge by both parties or particularly within knowledge of one party
and of such a nature that other has no right to expect information, but, if
fact concealed is peculiarly within knowledge o f one party and o f such a
nature that other party is justified in assuming its nonexistence, there is a
duty of disclosure, and deliberate suppression of such fact is fraud
[emphasis added)83.
A lthou gh this c o n c e p t applies generally to all c o n tra c ts between
parties dealing at a r m ’s length, it has seen its greatest a p p lica tion in
c o n tra c ts for the sale o f land. In Williams v. Benson 84 the M ichigan
C o u r t o f A ppeal found the v endor o f a te rm ite infested h ouse liable
for fra udu lent con c ea lm e n t o f th a t fact purely by virtue o f its n o n ­
disclosure:
...we hold that where a vendor has knowledge of the past or present ex­
istence of an instrumentality of progressive destruction or substantial im­
pairment, notwithstanding reason to believe that the progression has been
halted, a duty to disclose the circumstances arises... [T] he doctrines of
Michigan law am algam ate to the point where a full disclosure of such basic
defects as the term ite infestation...sewage disposal problem ...erosion...re­
quire full disclosure and caveat emptor has no place. Silence as to the ex­
istence or pre-existence of such known instrumentalities of progressive
destruction or substantial .im pairm ent, even absent specific inquiry , can
create liability...(emphasis added)

79 See: 37Am. Jur. 2d 198, s 145 et seq.

80 Stewart v. Wyoming Cattle Ranche Co. (1888), 128 U.S. 383, 9 S. C t. 101 (U.S.
Circuit C t., Nebraska).
81 Cohen v. Citizens National Trust and Savings Bank (1956) 300 p. 2d 14 (Cai. Ap-
p.) per Moore J.; Nowicki v. Padgorski (I960), 101 N.W. 2d 371 (Mich. S.C.).
82 Cohen v. Citizens National Trust and Savings Bank, supra, n. 80 Central Mutual
Ins. Co. v. Schmidt (1957), 313 p. 2d 132 (Cal. App.); Parker v. Green (1966), 340
S.W. 2d 435 (M o. App.); W olf v. Brungardt (1974), 524 p. 2d 726, (Kan. S.C.);
U.S. Fibres Inc. v. Proctor & Schwartz Inc. (1973), 358 F. Supp. 467 (D.C.
Mich.); Ramel v. Chasebrook Construction Co. (1961), 135 So. 2d 876 (Fla.
App.).
83 (1959), 339 P. 2d 8 (Kan S .C.), Jackson J. see also: Reeder v. Guaranteed Foods
Inc. (1965), 399 P. 2d 822 Kan. S.C.).
84 (1966), 141 N.W. 2d 650 at 656 (Mich. C.A.) per Fitzgerald J.
 U.M.B. L A W J O U R N A L 77
T his is certainly a p r a g m a tic expa nsion o f the c o m m o n law as it has
been applied in C a n a d i a n C o u r ts .
T h e A m e r ic a n view th a t disclosure o f m a teria l facts affecting
quality or value m u st be disclosed by the seller if (1) the seller posses­
ses so m e special know ledg e a n d (2) the p u rch a ser does n o t possess
th a t k now ledge and c a n n o t rea so n ab ly be expected to acquire that
know ledge, has so m e p ractical d r a w b a c k s. Since there is no positive
act indicating a fra u d u len t intent, p r o o f o f fraud can be very
onerous. T h e C o u r t m ust be satisified by a “ clear, convincing and
s a tisf a c to r y ” p r e p o n d e ra n c e o f evidence before it will ascribe a
f ra u d u len t intention to the v e n d o r ’s non-d isclosu re.85 T h e C o u rt
m a y be relu c tan t to find th a t the v endor possessed special knowledge
to which th e pu rch a ser has no r ea so n ab le m e ans o f access. In
R eeder v. Guaranteed Foods, Inc.*h for exam ple, the plaintiff
p u rch a sed a deep freeze unit from the d efe n d an t on a food plan
p r o g ra m w hereby the p la intiff expected he would save his family a
co n sid erab le food expense. H ow ever, the schem e did not prove to be
the saving th a t he h ad hoped. T h e plaintiff claim ed th a t the defen­
d a n t was u n d e r a d u ty to disclose how m uch a p u rc h a se r could be ex­
pected to save on food bills. T h e S u p re m e C o u r t o f K ansas rejected
the p la in tif f s co n tention. W h e re goods are open to the inspection o f
th e buyer, he is p resu m e d to be as co m p e te n t to ju d g e to their value
as the seller. T he co u rt felt th a t the p la intiff could have shopped
a r o u n d to c o m p a r e food prices to d e te rm in e how m uch he could save
(or lose) un d er the schem e offered by the defendant. W hile this case
did not deal with quality defects per se, it points out the difficulties
associated with th e rule o f disclosure where the vendor possesses
special kno w led ge as th a t rule has been expressed in the U nited
S tates. W h a t constittues an unfair b arga ining ad v a n ta g e will fall to
be d e te rm in e d by the peculiar facts o f each case.
CONCLUSION
By m isplacing its em p h asis on the right to inspect goods and
p io p e rty r a th e r th a n on a s ta n d a r d o f conscionability in c o n tra ctu a l
b arg a in in g , the c o m m o n law has p rodu ced an illogical inconsistency:
the distinction between active c o n c ea lm e n t a n d m ere acquiescence
in the b u y e r ’s m is ta k e as to the quality o f the goods or property. A
m o re ju st a p p r o a c h would be to require a vendor to disclose all
m a te ria l quality -re la ted defects know n to him before risk in the
g ood s passes to the buyer. T h e m a teria lity o f the defect would have
to be d ete rm in e d objectively by asking w h ether a rea sonable buyer,
fully ac q u a in te d with the facts, w ould have entered into the tr a n s a c ­

85 Reeder v. Guaranteed Foods, Inc. (1965), 399 P. 2d 822, (Kan. S.C.), Schroeder J.
86 Ibid.
78 U.N.B. L A W J O U R N A L

tion or, if so, at a greatly reduced price. T h e best solution m a y lie in

resort to s ta tu to ry e n a c tm e n ts defining a n d inform ing both parties of
th e ir respective rights and o bligation s as well as e x p a nding the
rem edies offered to an aggrieved as well as expand ing the rem edies
offered to an aggrieved p urcha ser. Such legislation should not be
restricted to the field o f c o n s u m e r go o d s b ut include c o n tra cts for
new business op p o rtu n ities a n d for the purch a se and sale o f real es­
tate.