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. . ."

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:

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

. 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

. 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

. 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

. The position in England since

the decision in

Overbrook Estates Ltd.

Glencombe

Properties

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

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."

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

Bain

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.

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

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

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