November 2016
It’s a good rule of thumb that, if an obligation is not actually written into a contract, you may find it hard to persuade the courts to enforce it. It’s also the case that the law generally does not recognise the existence of the supernatural. As with most things, however, exceptions apply.
In one famous American case, the buyer of one New York property got cold feet when he discovered the property had a local reputation for being haunted. He refused to settle and brought an action against the vendor for recovery of the deposit and damages for fraudulent misrepresentation.
The defence was based on the argument that (as a matter of strict metaphysical reality) ghosts aren’t real and that the purchaser therefore had no grounds for complaint. The trial judge was persuaded by this line of reasoning and rejected the purchaser’s claim.
His decision was appealed and heard by a panel of five judges, with the court finding in favour of the purchaser in a narrow 3-2 decision.
The dissenting judges said that, because nothing in the contract said the place was free of ghouls and phantoms, the rule of caveat emptor (or ‘buyer beware’) applied. They also argued that, while caveat emptor is not absolute, the suggested presence of ghosts was not a good reason to set the principle aside.
‘The existence of a poltergeist is no more binding upon the defendants than it is upon this court’ the dissenters said.
The majority, on the other hand, placed significance on the fact that the vendor had previously gone on the record affirming her belief in the ghost infestation. She had even submitted her story to Readers Digest when it ran a competition soliciting true stories of the paranormal. According to the majority, the result of this was that:
[w]here, as here, the seller not only takes unfair advantage of the buyer’s ignorance but has created and perpetuated a condition about which he is unlikely to even inquire, enforcement of the contract (in whole or in part) is offensive to the court’s sense of equity. Application of the remedy of rescission, within the bounds of the narrow exception to the doctrine of caveat emptor set forth herein, is entirely appropriate to relieve the unwitting purchaser from the consequences of a most unnatural bargain.
Translation: having helped put about the story that her house was haunted in such a public fashion, the vendor could not then argue the non-existence of ghosts to avoid a claim that it was haunted. So while ghosts may not exist as a matter of fact, they can exist as a matter of law – at least, in some circumstances.
If you think this was a bit rough on the vendor, don’t worry. The case generated publicity and, as a result, a new buyer came forward that actually wanted a house with a ghost in it.
As there is no record of the new buyer ever bringing suit against the vendor, one can only assume that he was pleased with the levels of paranormal activity at the property.
This is a useful illustration of the fact that, no matter what you put into a contract, your prior representations may be held against you. Always be careful about the representations you make in public. You may find yourself being held to them.
As a final note, readers should be aware that while this case is a useful illustration of a general point, the fact that the particular case is an American decision means it is of limited application to New Zealand law. Lawlink clients are advised to engage a priest, rabbi or other suitably qualified professional to exorcise any pesky spirits before moving into their new property.