The recent Court of Appeal case of Lloyd v Browning serves as a cautionary reminder to both buyers and sellers of land of the effect of non-reliance clauses. It is common practice in contracts for the sale of land to include a clause whereby the buyer is unable to rely on any pre-contractual statements made by the seller to allege that that induced them to purchase the land. Ordinarily only written replies between the parties’ solicitors can be relied upon by the buyer.
In this case, the buyer entered into a contract to buy a barn believing that there was planning permission to use the barn as a dwelling and also for a proposed extension to the barn. This was due to the fact that in several meetings between the buyer and the seller prior to the exchange of contracts, the plans produced by the seller showed the extension. However, those plans related to an earlier planning application by the seller which had been refused and there was in fact no planning permission for the extension. Further it would not have been possible to obtain such permission as the proposed extension was contrary to local planning policy. The seller was aware that the buyer wanted to build an extension and that this was not covered by the planning permission that had been granted.
The buyer wanted to exchange contracts quickly and told their solicitors that planning permission had been dealt with by their planning consultant and the buyer’s solicitors therefore did not include planning enquiries in their pre-contract enquiries.
The Court found that although the seller had misrepresented the property and that misrepresentation had induced the buyer into entering into the contract to buy the property, the contract for the sale of the property included a non-reliance clause limiting reliance on representations to those made in writing between the parties’ solicitors.
The Court confirmed that had the buyer wished to rely on the pre-contractual statement made by the seller, they could have acquired written confirmation from the seller’s solicitors.
Contract law states that non-reliance clauses are only valid if they are fair and reasonable. The Court held that the clause was reasonable because both parties had been legally advised during the transaction and they had equal bargaining power. Further the clause could have been defeated by the buyer’s solicitors dealing with the planning permission point in correspondence. Instead the buyer who was in a hurry to complete had deliberately decided to proceed knowing that they had incomplete planning information.
This case highlights the need for buyers and sellers to advise their solicitors of any pre-contract negotiations to ensure that any significant issues are dealt with in correspondence between the solicitors. The case also shows the importance for buyers to undertake full and proper due diligence of properties before contracts are exchanged.
Although this case concerns the sale of land, non-reliance clauses can commonly be found in contracts for the sale of goods and services.
If you require advice in relation to such a clause or in relation to any contractual dispute then please contract Luke Patel on 0113 227 9316 or email him at LPatel@LawBlacks.com