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Freeman v. Sandlaufer

2005 WL 2363824 (N.J. Super. App. Div. 2005) (Unpublished)

CONTRACTS; INSPECTIONS—Where a sales contract’s contingency provision speaks of “structural defects” without any further definition, then a damaged item that cannot be further inspected without destructive testing is considered as being a “structural defect.”

A buyer and seller entered into a contract for the purchase of a home. The rider to the contract contained a home inspection provision that permitted the buyer to cancel the contract if any structural defects were found during the inspection and the seller refused to repair them. The buyer’s attorney sent the seller’s attorney a copy of the inspection report along with a detailed list of structural defects, particularly with respect to a roof leak in the garage. The buyer also requested that the damage be further evaluated to determine the extent of the repairs that would be needed. The seller did not respond to the buyer’s request to further evaluate the extent of the water damage. The buyer then cancelled the contract for failure of the home inspection contingency and demanded return of the deposit. The seller refused, and the buyer sued for the return of the deposit. The lower court found in favor of the buyer, and the seller appealed. The Appellate Division affirmed. The Court noted that the contract provision dealing with “structural defects” did not define such defects either by description or with reference to the repair cost. However, the Court found that if the level of damage was such that it could not be determined without destructive testing, then the damage was structural. The Court was satisfied with the home inspector’s description of the damage and his opinion that the full extent of the damage could not be determined without conducting destructive testing. The Court found that since the level of damage could not be determined without destructive testing and such testing is not typically part of a home inspection, the buyer had the right to invoke the cancellation provision in the home inspection provision.

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