A Question of Ethics In 1999, Stephen and Linda Kailin bought the Monona Center, a mall in Madison, Wisconsin, from Perry Armstrong for $760,000. The contract provided,

“Seller represents to Buyer that as of the date of acceptance Seller had no notice or knowledge of conditions affecting the Property or transaction” other than certain items disclosed at the time of the offer. Armstrong told the Kailins of the Center’s eight tenants, their lease expiration dates, and the monthly and annual rent due under each lease. One of the lessees, Ring’s All-American Karate, occupied about a third of the Center’s space under a fi ve-year lease. Because of Ring’s fi nancial diffi culties, Armstrong had agreed to reduce its rent for nine months in 1997. By the time of the sale to the Kailins, Ring owed $13,910 in unpaid rent, but Armstrong did not tell the Kailins, who did not ask. Ring continued to fail to pay rent and fi nally vacated the Center. The Kailins fi led a suit in a Wisconsin state court against Armstrong and others, alleging, among other things, misrepresentation. [Kailin v. Armstrong, 2002 WI App. 70, 252 Wis.2d 676, 643 N.W.2d 132 (2002)]

1 Did Armstrong have a duty to disclose Ring’s delinquency and default to the Kailins? Explain.

2 What obligation, if any, did Ring have to the Kailins or Armstrong after failing to pay the rent and eventually defaulting on the lease? Why?