Material facts may also be evaluated in terms of objective or subjective standards:

• An objective standard would require that the fact affect the value or desirability of the property.

• A subjective standard would affect the value or desirability of a particular property where it may be important to a specific buyer.

A buyer desires to purchase a property located in a wooded setting that was once a toxic waste dump and toxic material continues to be released from the ground. Obviously, under an objective standard of evaluation, the toxic waste is a material fact that affects the value and desirability of using the site for its intended residential purpose.

Buyer A and Buyer B both desire to purchase a property near a school. Buyer A has two small children who would attend the nearby school. Buyer B is a single person who works the graveyard shift and is a light day sleeper. Under an objective standard, the location of the property near a school is probably not material, as it probably does not affect the value or desirability of the property one way or the other. However, when the location of the property is evaluated under the subjective desirability standard of Buyer A and Buyer B, the fact of the nearby school may be material for different reasons. For Buyer A, the location of the school may be material in that proximity to a school was important for easy school accessibility. For Buyer B, the proximity of the school is material because the noise may create a daytime sleeping problem. The subjective test is much more difficult to use as a basis to determine materiality, since the subjective standard may be different for each buyer. It is prudent to disclose such facts and let the buyer determine whether it is material or not.

The line between subjective and objective standards may sometimes be hard to draw.

If a house was discovered to be located on top of a gravesite, and that fact was not disclosed to the buyer, could the buyer rescind the contract to purchase? Although the condition of the property is not at issue in this type of case, generally, the courts try to apply the objective standard analysis to this and similar fact situations. Most courts in this type of case would reason that if a fact will have a quantifiable effect on the market value of a property, then the seller must disclose it under the objective standard. Nevertheless, the buyer might not care at all about the location of the house. However, the buyer would be affected economically by the location of the house since, upon resale of the property, he will have to disclose the location of the house on the burial ground. Thus, most courts, by tying their decisions in these types of cases to a potential loss of market value, have applied the objective standard to protect the stability of contracts by not allowing irrational objections as a basis for rescinding contracts.

A fact is material if a party would not have entered into a contract had they known the facts. Material facts may be evaluated in terms of objective or subjective standards.