Eric and Joyce Jensen (defendants) sold their house to Gene and Cynthia Bailey (plaintiffs). On a disclosure statement, the Jensens stated that any improvements they made on the house were conducted in conformance with building code. In fact, certain improvements were done without permits in violation of the code, although the Jensens were not aware of the violations. Two years after the sale, the Baileys brought suit for damages based on the nondisclosure. The circuit court found the Jensens should have known of the code violations and ruled in favor of the Baileys. The Jensens appealed.