Pre-contract discussions can be dangerous. What if a seller makes a statement that a buyer relies on in entering into a contract, but which turns out to be wrong? And does an ‘entire agreement’ clause make a difference? The owner of a boatyard and marina sold two houseboats, telling the respective buyers that the price included 125 year mooring rights at his marina. He also represented that the moorings were lawful and did not require planning permission but the representations, on which the buyers relied, were not true. So what remedy did the buyers have?
The court awarded the buyers damages under section 2(1) of the Misrepresentation Act 1967. It ruled that the seller did not believe, or have reasonable grounds for believing, that the moorings were lawful; and the buyers consequently suffered damage. The seller did not, however, owe a duty of care in negligence. Such a duty is usually owed by professional advisers, which the seller was not, and does not automatically arise between negotiating parties.
One of the contracts contained an ‘entire agreement’ clause but the court ruled that it did not make any difference, because the construction contract was clearly not the whole of the agreement. The representations and promises as to the mooring were not in either sale document but they were fundamental. And even if the clause applied, it was unfair and unreasonable.
The court also considered whether the misrepresentations had become terms of the contract. That turns on the intention of the parties, objectively ascertained from all the evidence, but in this case, although they had become terms, it did not change the outcome, because the damages for the misrepresentation and damages claims were the same. And those damages were the purchase prices of the houseboats, because a houseboat with no long term mooring rights was, on the evidence, worthless.