Thanks everyone for the feedback & the welcomes. I will try to answer everyone's questions in this post.
We have had the puppy for 3 days.
When my husband spoke to the breeder this morning she offered to take the puppy back and said she was "concerned". There is another person that I know that got 2 puppies from this breeder at the same time we got our puppy. The breeder said that this other person had had no problems with her puppies. A bit of a lie, really. I spoke with the other person this morning and it turns out that she has not been able to get an appointment with her vet yet. So, her puppies have not been checked out...of course she has not had any health problems as of yet.
Our contract with the breeder covers hereditary defects, states that the puppy is completely healthy at the time of sale and that no health problems are expected.
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Most of the time, the new owners have gotten so attached that they do not want to part with their furbaby ...in that case I think the medical expenses are up to you. I know when I purchased my babies I wouldn't be able to part with them if they had any health issues and I would have to pay the expenses myself.
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You are correct, we love this puppy and it would break our hearts to have to give him back at this point. However, we have only had him for 3 days and these are all obviously problems that he had when we picked him up on Monday. Our vet found all of these issues with a 10 minute exam. This puppy was supposed to have been checked from head to toe and I have an exam checklist from the breeder's vet. If our vet found these problems so easily, I would expect that the breeder's vet would have as found them as well.
The shocking thing is that this breeder was highly recommended by so many other people, including some well-respected breeders. I spoke with about 8 people that had purchased puppies from this breeder and asked all of the right questions.
The vet told us yesterday that none of these issues are life threatening (Except perhaps for the virus which we are not entirely sure the puppy has. The vet thinks he may be doing something called "reverse sneezing"). We were particularly concerned about the arrhythmia but the vet told us it should be ok. The bottom line here is that we were mislead about the health of this puppy and the breeder just seems to think this is really not a big deal.