As to how it happened overnight....let me tell you a story!
I had a mare, completely locked in both stifles and bred.(Long story, not my mare!)
She was the worst I had ever seen, and looking at her hocks you could see exactly why the stifles were slipping and locking, the angles were such that there could have been almost no "groove" to help keep the stifles in place.
Anyway, fast forward to her incredibly beautiful, Black Dun based blanket colt, that I ran on. At exactly one year old, almost on his birthday, I heard him start to "click" in one stifle, the next week it was both and two weeks roughly, after that he was locking up in one and then the other stifle. Of course I had been expecting it, which was why I would not allow him to be sold as a foal. He was gelded and given as a companion to a mare I sold on condition that he was operated on. The mare had been bred again, and then I threw a major wobbly (that I should have done two years before) and the upshot was the mare was given to me, I found her a home and she is happy pulling a cart and not having any more babies.
But, although I had expected the colt to be stifled, when he "went" he went almost overnight. Had I not expected it, ie had he come from sound stock, it would have looked just like your colt, and I would have been asking the same questions as you- how could it happen overnight?
Well, the answer seems to be that it almost always does happen overnight, sometimes quite literally, to the extent where the new owner is sure the horse must have injured itself (cast, caught on the fence etc).
Since you got him form a "big Name" farm, and we all know and love these people, everyone is being very polite about it all, so the next time someone starts saying "They MUST have known before they sold it to me, these people are nothing short of crooks" perhaps we could all remember this thread??
Very often it actually is NOT possible to tell before the animal starts locking out- the only time I would "blame" the seller is if the animal was locking before it was sold and the buyers were told, erroneously, that the animal would grow out of it.
And I apologise for the lecture- I know you are not blaming the seller and I think they are doing what any conscientious breeder should do, under these circumstances.