A recent court case shows that the concept of 'buyer beware' is still alive and well

The Supreme Court had to decide whether an estate agent was liable for overstating the size of a property.

By Dermot McEvoy Partner, Eversheds Sutherland

IN JUNE, THE Supreme Court overturned a High Court decision issued in 2007 that found against Jones Lang Lasalle because its sales brochure had negligently misrepresented the size of a premises’ floor space by approximately 8%.

Despite the principle of ‘buyer beware’ and a disclaimer in JLL’s brochure, the High Court imposed liability on JLL.

The decision was overturned by the Supreme Court, with a 3-2 majority, which held that JLL had not assumed responsibility for the accuracy of the information contained in the brochure.

Background

JLL was engaged by the vendor as estate agents to sell a commercial property in north inner city Dublin. JLL prepared a two-page sales brochure which included information on location, title and measurements of the property. The brochure also included a liability disclaimer.

However it subsequently transpired the measurements stated in the brochure were incorrect. David Walsh purchased the premises, relying on the representations supplied in JLL’s brochure – to his financial detriment.

Walsh did not hire an independent expert to confirm the measurements. Subsequently, JLL’s alleged “misrepresentation” was discovered when he proceeded to rent the premises.

The High Court held that a “special relationship of proximity” existed between Walsh and JLL, which was sufficiently close to create a duty of care owed by JLL in its capacity as estate agent. This extended to the purchaser.

The High Court awarded Walsh damages in excess of €300,000 for the “negligent misstatement” of measurements in the brochure.

A negligent misstatement arises where the defendant makes a representation of fact that is incorrect in circumstances where they know or ought to have known that this representation was going to be detrimentally relied upon by the plaintiff.

Detriment, in this context, was in the context that the defendant was aware or ought to have been aware that the plaintiff was not to going to get a second opinion on the issue.

The Supreme Court however overturned the High Court’s decision and held that JLL was not liable to the purchaser for an error in its sales brochure as it did not assume responsibility for the contents of the brochure. It held that the High Court had erred in its application of the applicable test.

The disclaimer

The core issue of the case concerned the disclaimer used by JLL and whether it sufficiently enabled JLL to avoid liability to the purchaser in respect of the misstatement included in the brochure. The disclaimer stated:

“Whilst every care has been taken in the preparation of these particulars, and they are believed to be correct, they are not warranted and intending purchaser/lessees should satisfy themselves as to the correctness of the information given.”

Justice Donal O’Donnell emphasised that, in the wording of the disclaimer, prospective purchasers were expressly advised to satisfy themselves of the information supplied.

Furthermore, given the nature of the sale, the circumstances surrounding the sale and the bargaining position of the parties, the Supreme Court held that the disclaimer was fair and reasonable.

Thereby, confirming that an effectively drafted disclaimer can negate or limit the imposition of liability.

The four key take-away points

  • The principle of ‘buyer beware’ remains and it is advisable that thorough purchaser due diligence is conducted at the pre-contract stage;
  • Purchasers should act prudentially and not rely on information supplied by their agents, providing an effective liability disclosure is included;
  • Prospective purchasers may also consider obtaining letters of reliance or seek a warranty from their respective agents as to the reliability of the information provided;
  • Agents and auctioneers ought to be cognisant of the importance of ensuring any disclaimer they include in a document is visible and clearly worded in order to ensure that no duty of care is owed to third parties.

Note: This information is for guidance purposes only and should not be regarded as a substitute for taking legal advice.

Dermot McEvoy is a partner in dispute resolution and litigation at Eversheds Sutherland. This article was written in conjunction with Siobhan Marry, an associate in the same team.

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