Gotta Have Faith

Redhibition law in Louisiana allows for purchasers of a thing – be it a new home, car, RV or even a 4-wheeler – to recover damages from the seller when that thing had a defect at the time of the sale.

Of course, the severity of the defect has the largest impact not only on inconvenience and headache for the buyer, but on the amount they can recover. However, what the seller knew about the condition of the thing when it was sold can have a major impact on recovery as well.

Sellers are placed in two different categories: good faith sellers and bad faith sellers.

A good faith seller is one who had no knowledge of a defect in the product when it was sold. Take for example a situation with a recent client. The client purchased a brand new 2017 model pick-up truck from a local dealership. Unbeknownst to the dealer, the truck had a host of issues with its 4×4, Anti-Lock Brake and traction control systems. That’s the nature of the auto sales business – dealers purchase new cars and turn right around and sell them to the consumer.

On the other hand, a bad faith seller, generally speaking, is one who knows of the defect in the thing and either fails to or refuses to tell the buyer. However, an interesting legal nuance exists when dealing with manufacturers of these things. Let’s go back to the example above about a recent client’s purchase of a new truck. Even though the dealer almost certainly had no knowledge of the defect in our client’s truck, the manufacturer will be deemed by law to have knowledge of the defect. This is because they, as the manufacturer of the thing – even if they don’t have actual knowledge of a defect – can and should know if the product leaving their factory is safe, dependable and non-defective or if it’s a lemon. The manufacturer, therefore, is deemed to be in bad faith.

The significance of classifying a seller as either good faith or bad faith is important for the plaintiff and what they can recover. That’s because Louisiana law allows plaintiffs in a redhibition suit to recover reasonable attorney fees earned in connection with the case as well as certain expenses made in connection with the original sale when the liable party is a bad-faith defendant.

Another way that the classification is important is because of its effect on the enforceability of a waiver of redhibition. The right to sue for redhibition is one that can and often is waived by the buyer in the sale contract. However, this waiver is not valid when it is part of a sale from a bad faith seller – be it one that had actual knowledge of the defect and sold it anyway or in the case of the “bad faith” manufacturer like the example above.

As a result, it’s often better for the buyer to go straight to the top of the ladder and seek recovery from manufacturer itself rather than from the local dealer. This allows the buyer to recover attorney fees and allows the buyer to avoid forfeiting the legal right to sue when they have bought a lemon.