When thinking about legal terms or concepts, business professionals may come across the term “latent defect.” So what is a latent defect? A latent defect is a hidden problem with a product or service that may not be visible or discoverable until after the purchase or signing of a contract. A latent defect may not be known, foreseen or a foreseeable risk at the time of sale/contract of purchase.
Examples of Latent Defects
A common example of a latent defect is the purchase of a used car. The seller may not have disclosed an accident the car was in, which caused significant frame damage that can compromise the safety of the vehicle. Another example would be purchasing a home and discovering that the roof has an undetected leak. These examples illustrate why a latent defect can be difficult to identify and potentially costly if left unchecked.
The Impact of Latent Defects in Business
Latent defects have a significant impact on business. If the defect is discovered after purchase, the naive purchaser may seek relief in a court of law through a lawsuit claiming breach of contract, misrepresentation, or other related tort. Business professionals should learn to recognize when a latent defect may exist and any potential legal risks associated with its discovery.
How to Identify Latent Defects
Identifying latent defects can be difficult. An experienced inspector may be able to detect some defects through careful examination. If a product or service carries a warranty, this can help indicate that there may be latent defects that have yet to be discovered. Additionally, if there is a concern for a latent defect, buyers may insist on a release of liability from the seller before purchasing.
Conclusion
Understanding what a latent defect is and how to recognize it is an important part of being a business professional. Knowing how to identify the potential for a latent defect and its subsequent impacts on business and contractual agreements is critical for success.