Bryan Easton Grimshaw & Co www.grimshaw.co.nz

Vendors sometimes try to exclude liability for any representations that they or their agents may have made.

They do this by including a disclaimer or an acknowledgment clause in sale and purchase agreements and marketing material about properties they are selling.

These clauses are often used when property is sold at auction.

A disclaimer will typically state that the vendor does not warrant the accuracy of any information or representations made about the property. By contrast, an acknowledgment clause will include a statement to the effect that the purchaser has not relied on any representations made by or on behalf of the vendor, and that he/she buys the property solely in reliance on his/her own judgement.

The High Court recently had to consider whether to give effect to an acknowledgement clause in Leigh v MacEnnovy Trust Ltd. In that case, two purchasers agreed separately to buy adjoining apartments off the plans in a proposed residential development in Auckland. Both purchasers sued the vendor on the basis it had misrepresented the size of the actual living area of each apartment in its promotional statements by including (without reference), the outdoor/deck areas. The vendor relied on a term in the agreements stating, ‘the purchaser acknowledges that it has not been induced to execute this agreement by any representation, verbal or otherwise, made by or on behalf of the vendor, which is not set out in this agreement'.

The Contractual Remedies Act 1979 allows a court to decide whether or not to give effect to such an acknowledgement clause having had regard to (1) all the circumstances of the case, (2) the value of the transaction, (3) the respective bargaining strengths of the parties, and (4) whether any party was represented or advised by a solicitor.

The court found in favour of the vendor after finding it was fair and reasonable that the clause should be conclusive between the parties, because (1) the subject matter and value of the transaction justified contractual certainty, (2) there was no disparity in the parties' respective bargaining strengths, and (3) each party sought and received legal advice.

Bryan Easton is an associate at law firm Grimshaw & Co where he specialises in building defect disputes including leaky building claims. Email: bryan.easton@grimshaw.co.nz
Website: www.grimshaw.co.nz