The Gazette 1982

GAZETTE

APRIL 1982

any representations or negotiations leading up to the sale shall not annul the sale or entitle the Pur- chaser to be discharged from his purchase but shall entitle the Purchaser or the Vendor (as the case may require) to compensation in respect thereof. . ." I9 . Practical as this may be, the condition does not have the inherent flexibility of section 45 (2) which leaves it to the courts to decide whether damages or rescission is the appropriate remedy in each case. Section 45 (3) provides that damages may be awarded under section 45 (1) and under section 45 (2). However, these damages are awarded under section 45 (2), i.e. in lieu of rescission, this shall be taken into account in assessing liability for damages under section 45 (1), i.e., a liability for negligent careless or non fraudulent misrepresentation. The section, however, provides no guidance for the judges as to, for example, whether damages in lieu of rescission for negligent misrepresentation, under section 45 (2) are to be the same or larger or smaller than damages under section 45 (1). Provisions excluding liability for Misrepresentation Section 46 provides that: 4 if an agreement (whether made before or after the commencement of this Act) contains a provision which would exclude or restrict: any liability to which a party to a contract may be subject by reason of any misrepresentation made by him before the contract was made or any remedy available to another party to the con- tract by reason of such misrepresentation that provision shall not be enforceable unless it is shown that it is fair and reasonable.' The 1980 Act only applies to contracts made after the 31 December 1980 20 . An exception is section 46 which applies to any agreement whether made before or after the commencement of the Act. This provision has rather strange consequences. Clauses excluding liability for breaches of contractual terms, in contracts made prior to the 31 December 1980 are not affected by the provisions of the 1980 Act. However, clauses excluding liability for misrepresentation made prior to the operation of the Act are, by reason of section 46, subject to the require- ment that they be fair and reasonable. A requirement that could conceivable apply to all contracts made six years prior to the commencement of the 1980 Act 21 . This provision, like section 44 (a), only serves to underline the uneasy relationship within these statutory provisions of misrepresentations and terms. It is also an example, of obscure wording, having a result never contemplated by the legislature. There is no such provision in the English legislation and it has now been removed from the Northern Ireland legislation also 22 . Section 46 should, like the other provisions of the Act, have been limited to contracts made after the commencement date. The equivalent U.K. provision is section 3 of the 1967 Act which Cheshire and Fifoot suggest is a model to be avoided if legislation is sought to deal with the problem of exemption clauses 23 . The position in England since a) b)

the decision in Overbrook Estates Ltd. v. Glencombe Properties 24 is that it is perfectly easy to avoid section 3 and the same will undoubtedly occur in relation to sec- tion 46. This case concerned the particulars of sale drawn up by an auctioneer which contained the provision that 'neither the auctioneers nor any person in the employ- ment of the auctioneers has any authority to make or give any misrepresentation or warranty'. The defen- dants alleged misrepresentation, in respect of develop- ment plans of a local authority concerning property which the defendants purchased. It was held that even if the defendants could prove their allegations they would be defeated by the clause set out above. The clause did not offend section 3 since it was not an exemption clause but only a limitation on the apparent authority of the auctioneer. Cheshire and Fifoot 25 suggested that had the draftsmen foreseen the decidion in Overbrook , he would have proceeded differently. Yet the error is repeated in section 46. This indicates the problems that can arise where legislation is "lifted" straight from the U.K. Act without sufficient regard to subsequent developments, j In any event, Wylie suggests, an agreement could not be taken to apply to "pre contractual statements such as replies to preliminary enquiries or to particulars provid- ed by auctioneers or estate agents." 26 One provision which would, however, seem to fall within the limited ambit of section 46 is Condition 18 of the Law Society's General Conditions of Sale, purporting as it does to ex- clude or restrict liability for misrepresentation. Condi- tion 21 (1) which entitles a house purchaser to damages for misrepresentation but precludes him from rescin- ding the contract is unaffected by section 46. Damages and the Failure to Show Title The right of a purchaser to recover damages for breach of contract by a vendor who fails to show good title in the property in question is governed by the Rule in Bain v. FothergilF. This Rule states that, provided the vendor has acted in good faith and not fraudulently, the purchaser can only recover his deposit plus interest and any expenses incurred in investigating title. The purchaser in such circumstances may not recover damages for loss of bargain, contrary to the general ) rules of damages. The Rule was originally justified by ' the complexities of investigating title decades ago. To- day it is regarded as something of an anomaly but it has yet to be discarded, either here or in the U.K. 28 However the English courts have shown a willingness to restrict the application of the rule, at least where it falls foul of a modern statutory provision, see Wroth v. 7>/er[l974] 1 Ch. 30 re Matrimonial Homes Act 1967. More important, in the context of this article, is the case of Watts v. Spence [1975] 1 WLR 1039. Here the defendant, contracted to sell his house to the plaintiff, without the consent of his wife who was in fact a joint owner of the property. The wife subsequently refused to join in the sale and the plaintiff sued for specific perfor- mance or alternatively damages for misrepresentation. Graham J, refused specific performance and held that the damages to which the plaintiff would be entitled at common law were restricted by the Rule in Bain v. Fothergill. However, the defendant had made a false statement, one which he did not believe to be true nor did he have any reasonable grounds for any such belief, which induced the plaintiff to enter the contract. As such the situation was governed by section 2 (1) of the

4 2