Contracts for the sale of land invariably contain a clause stating that whilst a buyer may rely upon written replies to written pre-contract enquiries which pass between solicitors, any other pre-contractual statements made by the seller aren’t incorporated into the contract and may not be relied upon by the buyer.
Whether non-reliance clauses work will very much depend upon the circumstances of any particular transaction. In the 2010 case of Food Co UK LLP v Henry Boot Developments, a non-reliance clause was held to be reasonable. A similar verdict has recently been reached by the Court of Appeal in the case of Lloyd v Browning.
In the Lloyd case, the seller had obtained planning permission to convert a barn to residential use. The original drawings envisaged an extension being constructed but since extensions were contrary to local planning policy, the drawings were revised to remove it.
The property was marketed and a buyer was found. The seller produced the original drawings to the buyer on which the extension was shown. The buyer instructed solicitors to purchase the property but didn’t ask them to review the planning drawings or the planning permission.
The buyer proceeded to exchange and some two weeks after completion was notified by the local planning authority that the extension, shown on the original drawings, was not authorised by the planning permission which the property had the benefit of.
At first instance the High Court held that although the misrepresentation (being the production of the incorrect drawings) had induced the Buyer to enter into the contract, the non reliance clause was fair and reasonable.
The buyer submitted an appeal which was dismissed by the Court of Appeal. The Court took the view that since the contract was a negotiated document forming part of an arms-length transaction in which both parties were advised, the clause was neither objectionable nor unreasonable. Had the buyer wished to rely upon the seller’s oral statements (and the original drawings), he could have sought clarification from the solicitors acting on behalf of the seller (those representations would then have fallen within the statement in the contract).
This case doesn’t create any new law but serves as a cautionary tale. Where there are extensive pre-contract negotiations between the parties that don’t involve solicitors, any important points should be confirmed by solicitors (or other reliance obtained by way of, for example, collateral warranties).
If you wish to discuss any of the issues raised in this blog, please contact David Eminton at email@example.com