Under the doctrine of caveat emptor ("buyer beware"), silence is not fraud, so that unless a seller intentionally gives false information about the property, there is no fraud:

It is settled law in New York State that the seller of real property is under no duty to speak when the parties deal at arms length. The mere silence of the seller, without some act or conduct which deceived the purchaser, does not amount to a concealment that is actionable as a fraud (see, Perin v. Mardine Realty Co., 5 A.D.2d 685, 168 N.Y.S.2d 647, affd. 6 N.Y.2d 920, 190 N.Y.S.2d 995; Moser v. Spizzirro, 31 A.D.2d 537, 295 N.Y.S.2d 188, affd. 25 N.Y.2d 941, 305 N.Y.S.2d 153). The buyer has the duty to satisfy himself as to the quality of his bargain pursuant to the doctrine caveat emptor, which in New York State still applies to real estate transactions.

Nonetheless, the courts have eroded this doctrine caveat emptor, especially with regard to environmental matters, and may imply a duty to disclose defects to a buyer, even if no inquiry is made. Stambovsky v. Ackley, 169 A.D.2d 254, 572 N.Y.S.2d 674 (1st Dep't 1991) (duty to disclose haunted nature of house); Young v. Keith, 112 A.D.2d 625, 492 N.Y.S.2d 489 (3d Dep't 1985) (duty to disclose faulty water and sewer systems).

If, however, some conduct (i.e., more than mere silence) on the part of the seller rises to the level of "active concealment" (Slavin v. Hamm, 210 A.D.2d 831, 832, 621 N.Y.S.2d 393; see, Stambovsky v. Ackley, 169 A.D.2d 254, 257, 572 N.Y.S.2d 672), a seller may have a duty to disclose information concerning the property.

The doctrine may not apply if there is a fiduciary relationship between the parties, so there is a duty to disclose. Horgan v. Frenkel, Kovac & Co., 161 Misc. 493, 293 N.Y.S. 164 (App. Term 1^st Dep't 1934). Further, the doctrine may not apply if knowledge of the defects was "peculiarly within the sellers' knowledge." Platzman v. Morris, 283 A.D.2d 561, 724 N.Y.S.2d 702, 704 (2d Dep't 2001). However, where the buyer is on notice to the problem, caveat emptor will apply. Bank North Salem v. Haight, 204 A.D.2d 949, 612 N.Y.S.2d 281 (3d Dep't 1994).

II. Merger

Under the doctrine of merger, "all provisions regarding the sale of the real property merge into the deed and are extinguished absent a manifestation of intent for a provision to survive transfer of title." CGM Construction Inc. v. Miller, 263 A.D.2d 831, 833, 693 N.Y.S.2d 763, 765 (3d Dep't 1999). Therefore, where a landowner is suing the prior owner for selling defective property (such as contaminated land), the doctrine of merger is generally a bar to claims arising out of the purchase and sale contract. White v. Long, 204 A.D.2d 892, 612 N.Y.S.2d 482 (3d Dep't 1994), mod. on other grounds, 85 N.Y.2d 564, 626 N.Y.S.2d 989 (1995). Accordingly, it is in the buyer's interest to be sure that his or her purchase contract includes provisions such as warranties, representations and indemnifications with regard to property conditions that survive closing. See, e.g. Avalon Realty, Inc. v. Baumrind, 203 A.D.2d 185, 610 N.Y.S.2d 269 (1st Dep't 1994), app. dis'd 84 N.Y.2d 864, 618 N.Y.S.2d 8 (1994) (buyer justified in canceling contract based upon false representation regarding lack of tidal wetlands).

Thus, contractual indemnity provisions may require a seller to reimburse a buyer for fixing a defect, such as cleaning up environmental contamination. State v. Tartan Oil Corp., 219 A.D.2d 111, 638 N.Y.S.2d 989 (3d Dep't 1996); Gettner v. Getty Oil Co., 226 A.D.2d 502, 641 N.Y.S.2d 73 (2d Dep't 1996). While the warranties of the deed itself are actionable, environmental contamination is not a breach of the warranty of quiet enjoyment. White v. Long, 204 A.D.2d 892, 612 N.Y.S.2d 482 (3d Dep't 1994), mod. on other grounds, 85 N.Y.2d 564, 626 N.Y.S.2d 989 (1995); Roth v. Leach, Index No. 30639 (Sup. Ct. Wayne Co. 1990, Parenti, J.).

The merger doctrine neither bars a claim of fraud, Lawlor v. Engley, 166 A.D.2d 799, 563 N.Y.S.2d 160 (3d Dep't 1990), nor mistake, Larsen v. Potter, 174 A.D.2d 801, 571 N.Y.S.2d 121 (3d Dep't 1991); Copland v. Nathaniel, 164 Misc.2d 507, 624 N.Y.S. 514 (Sup. Ct. Westchester Co. 1995). Nor is it a bar to a claim based upon an indemnification, representation or other provision intended to survive closing or outside the contract. 

Furthermore, the doctrine only extinguishes the purchase contract, and does not bar statutory duties, such as the warranty on new homes under General Business Law Article 36-B. Thus, claims under an environmental statute, such as the Oil Spill Law, are viable in spite of merger. White v. Long, 204 A.D.2d 892, 612 N.Y.S.2d 482 (3d Dep't 1994), mod. on other grounds 85 N.Y.2d 564, 626 N.Y.S.2d 989 (1995).

"Excepted from this rule are provisions which involve a ' * * * collateral undertaking' that is not connected with the title, possession or quantity of land.'" Hunt v. Kojac, 232 A.D.2d 858, 666 N.Y.S.2d 330, 332 (3d Dep't 1997) (contingency related to well, septic system and leach field were merged). For example, in Irmer v. Autohaus, Civ. No. 92-CV-6553L (W.D.N.Y. 6/11/93), Daily Record July 1-2, 1993 an indemnification agreement contained in a separation agreement was not barred by a subsequent deed.

III. "As Is" Clause

An "as is" clause is typically contained in a real estate contract. Paragraph 12 of the standard contract approved by the Monroe County Bar Association provides that "Buyer agrees to purchase the property 'AS IS' except as provided in paragraph 2," which does contain specific representations regarding certain items.

Nonetheless, even if the "as is" clause survives closing, it merely "precludes causes of action based on breach of warranty, not those based on statutory liability." Umbra U.S.A., Inc. v. Niagara Frontier Transportation Authority, 262 A.D.2d 980, 981, 693 N.Y.S.2d 371, 372 (4^th Dep't 1999), lv. den'd ___ N.Y.2d ___, 697 N.Y.S.2d 455 (1999). Thus, it is generally not a complete defense to a statutory claim for environmental contamination, "leaving the burden of environmental hazards with the seller." 51 U. Pitts. L. Rev. 995, 1019, An 'As Is' Provision in a Commercial Property Contract: Should It Be Left As Is When Assessing Liability For Environmental Torts? (1990); International Paper Co. v. GAF Corp., 1995 WL 760641 (N.D.N.Y. 1995); Channel Master Satellite Systems, Inc., JFD Electronics Corp., 702 F. Supp. 1229 (E.D.N.C. 1988); Southland Corp. v. Ashland Oil, Inc., 696 F. Supp. 994 (D.N.J. 1988).

Therefore, the "as is" cause does not bar a claim under the New York Oil Spill Law. Umbra U.S.A., Inc. v. Niagara Frontier Transportation Authority, 262 A.D.2d 980, 693 N.Y.S.2d 371 (4^th Dep't 1999), lv. den'd ___ N.Y.2d ___, 697 N.Y.S.2d 455 (1999); Rugaber v. Vella, Index No. 88869 (Sup. Ct. Ontario Co. 2001, Henry, J.). In Umbra, the Fourth Department held:

The rider to the contract does not set forth in express and unequivocal terms the intent of the parties to exculpate defendant from its alleged actions in violation of the Navigation Law (see generally, Niagara Frontier Transp. Auth. v. Tri-Delta Constr. Corp., 107 A.D.2d 450, 487 N.Y.S.2d 428, affd. 65 N.Y.2d 1038, 494 N.Y.S.2d 695). Indeed, the rider does not state that plaintiff will assume the environmental risks associated with the property, that plaintiff intends to exculpate defendant from its prior actions on the property, or that plaintiff will indemnify defendant for the costs of removing environmental contamination on the property. 

IV. Fraud

Fraud is an intentional misrepresentation. If a seller intentionally deceives a buyer with respect to property conditions, the seller may be liable for fraud. Keywell v. Weinstein, 33 F.3d 159 (2d Cir. 1994) (misrepresentation with regard to the extent of TCE disposal); Kaddo v. King Service Inc., 250 A.D.2d 948, 673 N.Y.S.2d 235 (3d Dep't 1998) (misrepresentation of condition of underground storage tanks which had leaked onto neighboring properties and subsequently led to the closing of gas station); Scharf v. Tiegerman, 166 A.D.2d 697, 561 N.Y.S.2d 271 (2d Dep't 1990) (seller knew city was considering revoking status as legal three-family dwelling).

In spite of caveat emptor, a seller who knowingly fails to disclose the presence of environmental contamination or other hidden defects on a property may be liable to the buyer for fraud even if no inquiry or representations were made with regard to environmental contamination. See Roth v. Leach, Index No. 30639 (Sup. Ct. Wayne Co. 1990, Parenti, J.) (duty to notify buyer of presence of buried hazardous wastes); 195 Broadway Co. v. 195 Broadway Corp. N.Y.L.J., April 15, 1988, p. 6, col. 4 (Sup. Ct. N.Y. Co. 1988) (duty to notify buyer of presence of asbestos in building); Tahini Investments, Ltd. v. Bobrowsky, 99 A.D.2d 489, 470 N.Y.S.2d 431 (2d Dep't 1984) (buried drums); cf. Metzger v. Agway, Index No. 81362 (Sup. Ct. Ontario Co. 1994, Harvey, J.) (no fraud claim against owner who sold to seller).

However, no fraud claim can be made if the buyer is on notice to the potential defect. For example, in Banker North Salem Associates v. Haight, 204 A.D.2d 949, 612 N.Y.S.2d 281 (3d Dep't 1994), no fraud claim could be made against the seller of an apple orchard who had no knowledge of the use of hazardous chemicals. In Vandervort v. Higginbotham, 222 A.D.2d 831, 634 N.Y.S.2d 800 (3d Dep't 1995), a buyer could not make a fraud claim when he was on notice of a possible oil spill, since he knew that the property had been used as a motor vehicle repair shop, and floor drains were obvious.

There may also be a duty to give a buyer correct information about nearby environmental problems that may have an effect on value. Diggins v. Amato, Index No. 66839 (Sup. Ct. Steuben Co. 1994, Purple, J.), aff'd 214 A.D.2d 1056, 627 N.Y.S.2d 507 (4th Dep't 1995); see also Strawn v. Canuso, 271 N.J. Super. 88, 638 A.2d 141 (N.J. App. Div. 1994) (real estate broker may have obligation to investigate and disclose potential contamination on or near property).

Neither the statement that no representations are made, 60 N.Y. Jur.2d Fraud and Deceit §218; DeBell v. Nothnagle Florida Realty Corp., 24 A.D.2d 825, 264 N.Y.S.2d 190 (4th Dep't 1965), nor even an "as is" clause, 60 N.Y. Jur.2d Fraud and Deceit §207; George v. Lumbrazo, 184 A.D.2d 1050, 584 N.Y.S.2d 704 (4th Dep't 1992), app. dis'd 81 N.Y.2d 759, 594 N.Y.S.2d 719 (1992); Haney v. Castle Meadows, Inc., 839 F.Supp. 753 (D. Colo. 1993), necessarily bars a fraud claim.

V. Mistake

If defective property is sold, but there is no intentional fraud (perhaps because the seller did not know), there might be a mutual mistake. In Rekis v. Lake Minnewaska Mountain Houses, Inc., 170 A.D.2d 124, 130, 573 N.Y.S.2d 331, 335 (3d Dep't 1991), app. dis'd 79 N.Y.2d 851, 580 N.Y.S.2d 201, mot. to reargue den'd 79 N.Y.2d 978, 583 N.Y.S.2d 196 (1992), the court held that:

a contract is voidable under the equitable remedy of rescission if the parties entered into the contract under a mutual mistake of fact which is substantial and existed at the time the contract was entered into.

Relief for unilateral mistake is more restrictive. A "contract may be voided for unilateral mistake of fact only where enforcement of the contract would be unconscionable, the mistake is material and was made despite the exercise of ordinary care." Landes v. Sullivan, 240 A.D.2d 971, 974, 659 N.Y.S.2d 544, 547 (3d Dep't 1997). A unilateral mistake may be grounds for equitable relief, particularly "where the mistake is, or should be, known to the other party, or where it is induced by that party," Eastern Freightways, Inc. v. U.S., 257 F.2d 703, 707 (2d Cir. 1958), or there is "overreaching or inequitable conduct." Schiavone Construction Company, Inc. v. McGough, 112 A.D.2d 81, 82, 492 N.Y.S.2d 364, 365 (1^st Dep't 1985). 

VI. Property Condition Disclosure Act

The proposed Property Condition Disclosure Act provides the following remedy:

Any seller who provides a property condition disclosure statement or provides or fails to provide a revised property condition disclosure statement shall be liable only for a willful failure to perform the requirements of this article. For such a willful failure, the seller shall be liable for the actual damages suffered by the buyer in addition to any other existing equitable or statutory remedy.

Liability. Nothing contained in this article shall be construed as limiting any existing legal cause of action or remedy at law, in statute or in equity.

VII. Cases for Discussion

Stambovsky v. Ackley, 169 A.D.2d 254, 572 N.Y.S.2d 674 (1st Dep't 1991)

Roth v. Leach, Index No. 30639 (Sup. Ct. Wayne Co. 1990, Parenti, J.) 

Keywell v. Weinstein, 33 F.3d 159 (2d Cir. 1994)

Banker North Salem Associates v. Haight, 204 A.D.2d 949, 612 N.Y.S.2d 281 (3d Dep't 1994)

Copland v. Nathaniel, 164 Misc.2d 507, 624 N.Y.S.2d 514 (Sup. Ct. Westchester Co. 1995)

Rugaber v. Vella, Index No. 88869 (Sup. Ct. Ontario Co. 2001, Henry, J.)