Washington's Consumer Protection Act - Seller's Failure to Disclose Material Adverse Facts Not Easily Discoverable by Buyers
Washington's Consumer Protection Act (CPA) makes it unlawful to engage in unfair or deceptive acts or practices in trade or commerce. The purpose of the CPA is to protect the public and foster honest competition.The CPA applies to activities both before and after a sale, and may be violated by failure to disclose material facts. Smith v. Sturm, Ruger & Co., Inc., 39 Wn.App. 740, 747-48, 695 P.2d 600, review denied, 103 Wn.2d 1041 (1985).
To prove that a business engaged in an unfair or deceptive act, a CPA plaintiff does not have to demonstrate that the act was intended to deceive, but only that the alleged act had the capacity to deceive a substantial portion of the purchasing public. Sing v. John L. Scott, Inc., 134 Wn.2d 24, 30, 948 P.2d 816 (1997). Washington's High Court has held that even a breach of a private contract can affect the public interest, and support a CPA lawsuit if additional plaintiffs “have been or will be injured in exactly the same fashion.” Hangman Ridge Training Stables, Inc. v. Safeco Title Ins. Co., 105 Wn.2d 778, 790, 719 P.2d 531 (1986).
Washington law establishes a legal duty on sellers to disclose facts material to a transaction when the facts are known to the seller but not easily discoverable by the buyer. For example, in Testo v. Russ Dunmire Oldsmobile, Inc., 16 Wn.App. 39, 51, 554 P.2d 349 (1976), a car dealer failed to disclose that a Camaro was modified for racing, which increased the costs of repairs and maintenance. The Testo court held that the dealer's act of withholding these facts material to the sale was a deceptive act under the CPA.
The seller's legal duty to disclose material facts also exists in real estate transactions. In McRae v. Bolstad, 101 Wn.2d 161, 162-65, 676 P.2d 496 (1984), homebuyers successfully prosecuted an action under the CPA when the home sellers failed to disclose sewer and drainage problems. In holding that the homebuyer's claim met the CPA's public interest element, the court determined that the seller's failure to disclose material facts about the property was an unfair and deceptive act or practice.
In addition to this general duty to disclose material facts, the Disclosure Addendum to a Purchase and Sale Agreement for real estate creates a contractual duty for the seller to disclosure material facts. Accordingly, both Washington case law and the standard Disclosure Addendum to a Purchase and Sale Agreement used in Washington for real estate transactions imposes high legal duty on the seller to disclosure material adverse facts not easily discoverable by the buyers.
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