In a contract to build a tree house, the contractor knew that a tree had a common fungal infection in its core that would weaken the tree even if treated, and he did not require inspection. The contractor also knew treatment was expensive and would require additional supports. If the fungal infection causes issues after construction, who bears the risk under these facts?

• A. The homeowner bears the risk because it is the owner’s property.
• B. The contractor bears the risk because he knew of the infection and did not inform the homeowner.
• C. The insurer bears the risk because it insures the project.
• D. The government bears the risk because it oversees construction safety.

Answer: (B)

The key idea is that a builder or contractor who knows about a hidden defect and fails to disclose it bears the risk of its consequences. Here, the contractor knew the tree had a latent fungal infection that would weaken it even if treated and chose not to require inspection. Because the defect is hidden and the homeowner wouldn’t be able to discover it through a reasonable check, the contractor has a duty to disclose or address the risk. By keeping quiet about the defect and its implications (and by knowing that treatment would be expensive and require extra supports), the contractor effectively misrepresented or concealed a material condition. When that latent defect later causes issues after construction, liability for the resulting damage lies with the contractor, since the homeowner reasonably relied on the contractor’s expertise and disclosure. Ownership or insurance status and government oversight don’t automatically allocate this risk here.