Sales Brochure Liability.
High Court awards damages against agent for overstatement of floor
areas in Sales Brochure. In a recent High Court action1 a purchaser
successfully sued a selling agent having alleged he suffered loss due to
the overstatement of floor areas in the sales brochure. The Court found
that a selling agent owed a duty of reasonable care to the interests of
potential purchasers.
In light of this case agents should carefully consider their existing
disclaimer provisions to best ensure that they are sufficiently robust.
Sellers of property should consider the inclusion of contractual provisions to mitigate the
issues raised in the case. Although not an avenue pursued in this case it must be
remembered that an estate agent is an agent for the seller which may create liability for the
seller in certain circumstances.
Finally it is prudent for any purchaser to have a property independently valued prior to
purchase to professionally verify all information relevant to the property’s value.
In July 2000 a very well known firm of estate agents was appointed as selling agent for a two
storey corner building at Upper Gardiner Street in Dublin. The agent prepared a single page
brochure which on the front page set out the total floor area for the building. On the back
page a breakdown of the total was given. Both the total area and the first floor area were
each overstated by more than 1,800sq ft. This was an overstatement of almost 20% of the
actual total floor area of the building.
The following paragraph, disclaiming liability, was included in small print at the bottom of the
front page:
“Whilst every care has been taken in preparation of these particulars, and they are believed to
be correct, they are not warranted and intending purchasers/lessees should satisfy
themselves as to the correctness of the information given”.
The brochure was given to the plaintiff during the sales campaign which had culminated in the
submission of Best and Final Offers being made at the end of July 2000.
The plaintiff instructed his solicitor in the acquisition and had a building surveyor carry out a
condition survey. The building surveyor gave evidence confirming that he had never been
required to measure the floor areas of buildings as part of condition surveys.
The plaintiff submitted a successful offer of IR £2,342,000 for the building. The plaintiff in
evidence said that his offer was based on a “back of an envelope” calculation in respect of
estimating the possible rental value of the building. He said he had estimated a rental value
on a “per square foot” basis and using the floor areas given in the brochure he had calculated
the total estimated rental value of the building.
The plaintiff admitted that he would have been aware of the waiver but also noted that “every
care had been taken” and that the agent was “a firm of the utmost probity”. As an
experienced buyer and seller of property the plaintiff said he had never had a building
1
HC, unreported, January 2007
David Walsh and Jones Lang LaSalle [2001 No.15154p]
measured before making a purchase, depending instead on “the reputation, credibility and
integrity of the person advertising”. Expert evidence was given stating that the form of
disclaimer which is on most agents’ sales brochures comprised “an effort to protect the agent
from relatively minor errors” and the expectation would be that any measurements are correct
and could be relied upon.
Further expert evidence was given on behalf of the defendant that an intending purchaser
should carry out a detailed inspection including measurement of floor area before purchasing
a property. Evidence was given that it would not be considered acceptable practice to rely
solely on measurements set out in a sales brochure prepared by a seller’s agent.
The plaintiff did not challenge the contract itself and had not claimed misrepresentation or
fundamental breach of the contract. The plaintiff contended that by miscalculating the floor
area of the property and publishing the incorrect calculation in the sales brochure, the
defendant acted in a breach of duty of care which it owed to the plaintiff. The plaintiff alleged
that the defendant was guilty of making a negligent mis-statement, resulting in loss to the
plaintiff.
The judge stated that he was satisfied on the facts of the case that the defendant owed a duty
of reasonable care to the plaintiff to ensure that the calculation of the floor area of the property
which the defendant published in its sales brochure was accurate. He also found that as it
had been conclusively established by way of unchallenged evidence that the area of the first
floor of the property was overstated by more than 1,800 sq. ft. it followed that the defendant
was in breach of its duty to the plaintiff. The judge also held that he did not find the plaintiff
was guilt of negligence in failing to carry out a survey of the premises prior to his entry into the
contract before the purchase of the property.
The judge awarded damages based on the calculation by the defendant’s expert in an amount
of €350,000.
There is no mention in the judgement as to whether the Contract for Sale held any provision of
relevance. It is now common for contracts for the sale of commercial property to contain
“entire agreement” provisions. Such provisions include as a term of the contract that only
what is in the written contract and what passes in writing between the respective solicitors will
bind the buyer and the seller. The provision will usually explicitly exclude liability for
information furnished prior to contract in brochures, measurements, negotiation discussions
etc.
The Court did state that if an agent wished to reserve a right to publish in its sales brochure
measurements which were inaccurate and in those circumstances not carry any liability to
purchasers then there would be an obligation to explicitly advise of this. In the particular
circumstances of this case the Court found the disclaimer clause used had failed to discharge
that obligation.
Attribute to John Minihane, Partner, Mason Hayes+Curran.
John is a partner in the real estate department at Mason Hayes+Curran. For more information,
please contact John at jminihane@mhc.ie or + 353 1 614 5234. The content of this article is
provided for information purposes only and does not constitute legal or other advice. Mason
Hayes+Curran (www.mhc.ie) is a leading business law firm with offices in Dublin, London and
New York.
© Copyright Mason Hayes+Curran 2008. All rights reserved.