Have you ever bought something and later learned of issues that if you had known before you would never have made the purchase? Many times people visit our office claiming fraud or misrepresentation in such circumstances. If it's a business transaction though, people often don't realize that the seller in a business transaction really has no duty at all to disclose material facts to a buyer, even if they know, or suspect, the buyer may have issues with the purchase. As such, the concept of “buyer beware” is still alive and well in business law.
This buyer beware concept was recently reaffirmed by the Minnesota Court of appeals in the case of Driscoll v. Standard Hardware, Inc., 785 N.W.2d 805 (Minn. App. 2010). In Driscoll, claims were brought against the manufacturer of an industrial mining drill following a fatal accident. Among the claims asserted, the mining company alleged “misrepresentation by omission,” against the manufacturer, on the theory that the manufacturer knew about and should have disclosed known limitations and/or defects related to the grade of steel that eventually failed causing the accident.
The court in Driscoll, in affirming summary judgment of this claim, affirmed that “absent certain special circumstances, one party to a business transaction has no duty to disclose material facts to the other party.” Id. at 812 citing Richfield Bank & Trust Co. v. Sjogren, 244 N.W.2d 648, 150 (Minn. 1976).
So, in business transactions, don't expect the seller to disclose everything it knows about the product or asset, and make sure you are protected in your contract by conducting proper due diligence.