Ensure important representations are confirmed in writing.
Lloyd v Browning [4 November 2013] concerned the effectiveness of a widely used contractual provision to exclude liability on the seller’s part for misrepresentations.
The Brownings were farmers who decided to sell their property and, to enhance the sale, sought a planning permission to convert the farm buildings. Plans were prepared to convert an existing barn including adding an extension. It transpired that such an addition was contrary to local planning policies, and the plans were amended to exclude the extension and planning permission was granted. The property was put on the market with the benefit of the permission, but the sales particulars made no reference to the amended plans.
The Lloyds were interested in the property. Their understanding from the particulars was that the permission allowed for the extension, which was very important to them. Discussions took place between the parties referring to the plans incorporating the extension. The judge found that the Brownings had represented they were the plans in the permission, even though that was not the case.
The Lloyds’ solicitors raised pre-contract enquiries, but did not obtain the plans (they were told that their client had sorted this out). Also the plans without the extension had not been placed on the local authority’s files for public inspection.
Contracts were exchanged, including a special condition in common use within the Eastbourne Law Society area, but also more generally found in many property contracts. The condition provided that no statement made by the seller or his agent had induced the buyer to enter into the contract, except for written statements made by the seller’s conveyancers in replies to enquiries raised by the buyer’s conveyancers or in correspondence between the parties’ conveyancers.
After completion, the plans without the extension were located by the local authority and provided to the Lloyds, as a result of which they had to revise their plans and omit the extension. Losing the extension knocked £55,000 off the property’s value.
The Lloyds claimed against the Brownings seeking damages for misrepresentation. It was not alleged that the misrepresentation had been fraudulent. The county court rejected the claim. While the court found that the Brownings had misrepresented the position in relation to the plans which had induced the Lloyds to enter into the contract, the Brownings were not liable because of the exclusion clause. The Lloyds appealed, but the Court of Appeal rejected the appeal, deciding in the Brownings’ favour.
Section 11 of the Unfair Contract Terms Act 1977 applied to the exclusion clause, which meant that the provision, to be effective, had to be a fair and reasonable one to include in the contract, having regard to the circumstances when the contract was made. The Court decided that the clause was fair and reasonable.
Each side had legal advisers; the clause was a special condition agreed (not some small print), where the parties had equal negotiating positions and it was, more generally, in common use. Its purpose was to achieve certainty by preventing disputes on whether something was said or not. Perhaps, most importantly, the clause allowed the Lloyds to protect themselves by having the Brownings’ solicitors make a written statement confirming the position on the plans. This they failed to do.