Seller has to pay for latent defects

Mr Justice Joseph R. Micallef in his judgment Spillane – vs – Gatt of 4th August, 2016, found the defendant responsible for paying damages together with the difference in price of the total amount paid by Spillane for an apartment. This is because the apartment sold by Gatt to Spillane suffered from latent defects at the time when the contract was concluded. 

The plaintiffs in this case claimed that the apartment which they had bought from the defendant in Floriana suffered from latent defects, which they had not known anything about at the time of the contract of sale and for which, had they known about them, they would not have paid the price which they had paid to the defendant. The plaintiffs also stated that although the defendant was aware of such latent defects, he did not divulge this information during the contract of sale. Thus, given that the sale was not carried out in good faith, he was to make good for the damages suffered by the plaintiffs so as to enable them to repair the said defects. 

The action instituted here was thus, the actio aestimatoria, or as it is also known quanti minoris – a remedy based on the seller’s obligation to guarantee that he makes good for any latent defect. This action gives the buyer the opportunity to ask the seller for a reduction of the price already paid by him without having to cancel the contract. This is because in such cases, had the buyer known about the latent defects, he would not have paid the amount, which he would have already paid. Otherwise, the buyer may also opt to dissolve the contract and ask for the money back. This action applies both if the thing bought is movable and also, as in this case, if it is an immovable.

Naturally, in order to institute this action, the defect must be latent at the time of sale and which is of such a grievous nature that it renders the object inadequate for the use for which it was meant to be used, or which decreases the object’s value to such an extent that the buyer would not have bought it or would have offered a smaller SUM had he known about it.

Above all, latent defects have to be such that the buyer would not have been able to discover them, despite a serious and proper examination of the object, taking into account his knowledge and expertise. However, if the defect is one which would have been evident had a proper examination been carried out, it would no longer be deemed to be a latent defect, even if, at first glance, this would not have been visible.

In particular, the buyer could not claim lack of technical expertise due to the complexity of the object bought as an excuse for failing to carry out a proper examination of the object. If the buyer does not have the expertise necessary to examine the thing bought, he is to seek the help of a knowledgeable person. In this case, it is clear that the defect in question was indeed latent as the plaintiffs had appointed an expert to inspect the place properly. 

Article 1431 of the Civil Code gives the buyer a period of one year in which to institute the actio aetimatoria in cases relating to the sale of an immovable thing. Thus, despite the defendant’s claim that the action was prescribed, the Court has stated that in terms of Article 1431(2) this is not so since it was not possible for the buyer to discover the latent defect before the works of improvement were carried out. As long as the buyer discovers the latent defect by using ordinary diligence, then the prescriptive period of one year starts counting from the day in which it was possible to reveal the said defect, even though a long time would have passed from the moment when the object was bought and consignment took place. In other words, the term commences not from the day on which the buyer in actual fact comes to know about the latent defect but from the day when he could have known about it. Given that in this case, not even professional persons could have become aware of the latent defect in question, prior to the works of improvement having been carried out, then neither was it possible for the plaintiffs to discover them.

Furthermore, the Court states that simply because the phrase “tale quale” was inserted in the contract of sale, it does not mean that the plaintiffs chose to renounce to the seller’s guarantee against latent defects. In fact, in Carmelo Xuereb vs Nazzareno Azzopardi the Court clarified that such phrases do not amount to the explicit declaration required by law for a renunciation of a right. Conversely, a renunciation must necessarily be an express one and which does not allow for any doubt between the parties.

Furthermore, the exoneration contemplated in Article 1476 may only apply in relation to those contracts concluded in bona fede (as per Article 993 of the Civil Code) relating to defects, which the seller would not have known about. This is because if the seller were aware of such defects then he would have had the obligation to mention them to the buyer and thus, could not be exonerated from such a responsibility by including the clause of exoneration in a generic manner. 

In this case, the Court concluded that although mala fede is not to be presumed and is to be proven by those who allege it, it is of the opinion that the defendant knew very well about the latent defects in the apartment since after all, he resided in the apartment for around three years prior to the conclusion of the convenium in question. In fact, the defendant held back from informing the plaintiff as to what he knew, allowing them the opportunity to visit the apartment as few times as possible prior to the contract of sale. 

Furthermore, the Court explained that the actio aestimatoria does not entitle the plaintiffs to a liquidation of sum on the basis of damages but rather it implies a subjective exercise aimed at establishing what would have been the lesser amount (that is, from the price agreed upon) which that buyer would have been prepared to pay had he known about the latent defect at the time of the conclusion of the contract. After all, the aim is to place the buyer in the situation in which he would have been had he known about the latent defect.

Thus the Court holds that the action by the plaintiffs was brought about correctly and without any breach of the law, within the time limit outlined in article 1431 of the Civil Code. It finds that the apartment bought suffered from latent defects and thus, one needs to deduct the price, which the plaintiffs would not have paid had they known about such latent defect beforehand. The Court also holds that the defendant knew about the said latent defects at the time of the contract of sale and thus, he also has to make good for the damages incurred by the plaintiffs. 

Malcolm Mifsud, Partner, Mifsud & Mifsud Advocates