Courts may set aside the principle of caveat emptor when non-disclosure of a material fact renders the transaction fundamentally unfair, particularly if the seller has created or perpetuated a condition materially impairing the value of the property that would not be apparent to a reasonable buyer.
For example: If a seller knows about an underground stream that frequently causes flooding in the basement but has concealed this fact through temporary repairs during the period of showing and selling the house, equity could compel the court to allow rescission of the contract.