In the recent decision Tremblay v. Immeubles Perron Ltée, 2024 QCCA 719, the Court of Appeal underlined the impact of a purchase “at one’s own risk”.
The Facts
A series of real estate transactions set the stage for the analysis of successive warranties.
In March 2003, Immeubles Perron sold parts of a lot to Régis, Marjolaine and Gercom.
In March 2004, Régis and Gercom sold their shares to Marjolaine.
Both sales were made with legal warranty.
In July 2007, Marjolaine sold the lot to Régis without warranty, as is, but without going as far as stating that the purchase is “at his own risk and peril.”
In September 2015, Régis sold the lot to Danny and Émilie, who proceeded to build their home on the property.
Four years later, they wanted to sell their home. However, they learned that part of the lot had been acquired by the Saguenay Port Authority in 1969. It was only published in the registry of immovables in 2006, although a notice of expropriation had been published in the registry of names in February 1969. Danny and Émilie contested the expropriation, but to no avail.
Danny and Émilie sued Régis for an annulment of the sale and for damages, on the grounds that the title to the lot was defective. Régis in turn filed a warranty claim against, among others, Immeubles Perron, as the previous owner of the lot. Immeubles Perron contested the claim, alleging abuse and a lack of legal basis, since the warranty chain had been interrupted in 2007, when Marjolaine transferred the lot to Régis without a legal warranty.
Régis alleged that his recourse against Immeubles Perron was based on the sale that took place between Marjolaine and Immeubles Perron in March 2003, a sale that was made with the legal warranty. He also argued that Marjolaine was aware of the title defect, and that she failed to disclose it to him although she was obligated to do so.
The Decision
The Court of Appeal had to determine whether the trial judge erred in dismissing Régis’ warranty claim against Immeubles Perron.
The Court began by noting that the trial judge’s conclusion that clause 9 of the assignment contract applied both to the warranty of quality and to the warranty of title was not challenged on appeal. Next, the Court analyzed article 1733 of the Civil Code of Québec (hereinafter “C.C.Q.”), which provides that a seller may not exclude or limit his liability if he has not revealed defects of which he was aware or could not have been unaware, unless the buyer purchases at his own risk from a non-professional seller.
Thus, if the sale by a non-professional seller is made at the buyer’s risk, the seller is discharged, even if he knew or could not have been unaware of the defect, whether of quality or of title, and failed to disclose it.
Therefore, a buyer who renounces to all warranties, thereby acknowledging the associated peril, accepts the risk, and is thus precluded from pleading a defect in consent, except in the case of fraud.
Consequently, an exclusion clause in a contract, such as the one in this case, breaks the warranty chain and prevents a subsequent buyer from suing the other sellers based on a defect in the title. This is the first condition that must be met for the non-professional seller to be discharged under article 1733 C.C.Q.
The Court of Appeal pointed out that a second condition must be met for the seller to be discharged. This is the buyer’s declaration that the purchase is made “at his own risk and peril.” However, this declaration may be express or tacit. In all cases, it must be clear and unequivocal.
Insofar as Immeubles Perron was unaware of the defect, article 1733 C.C.Q. did not apply, and Régis’ waiver of warranty under the deed of assignment that concluded with Marjolaine continued to produce its liberatory effects regarding the other sellers in the chain.
Moral of the Story
The impact of agreeing to buy a building “at your own risk” should be considered with great caution. The risks are much broader than mere defects in quality, and the repercussions can be significant when you purchase land to build on.
