Entire agreement clauses – residential property sales
The Conveyancing Committee has noticed an increase in the number of queries it is receiving from the profession about the use of entire agreement clauses in contracts for sale of residential property.
The committee would like to remind practitioners of the content of its on this topic published in the Gazette (May 2006). That note pointed out that, while these clauses may take different forms, they essentially preclude a purchaser from relying on any advertisement, oral statement or statement in writing, whether or not in the course of any negotiations for the sale by the vendor or the vendor鈥檚 agent, and that the contract for sale represents the entire terms and conditions of the agreement between the parties.
The committee acknowledged in the 2006 practice note that 鈥渆ntire agreement clauses鈥 are commonly found in mergers and acquisitions agreements and are not unreasonable in that context, noting that, in such transactions, the prospective purchaser will have carried out comprehensive due diligence, and significant warranties on a number of matters will have been included in the agreement.
The committee had, however, gone on to highlight the fact that an entire agreement clause in a contract for sale of residential property will not only prevent the purchaser from relying on any advertisement, brochure or representation made or published by or on behalf of the vendor and also any replies given to a purchaser in pre-contract enquiries, but it will also exclude any oral answers given in reply to questions raised at an auction as well as to any statements made by the vendor to the purchaser.
The committee at that time expressed the view that such entire agreement clauses should not be included in agreements for the sale of residential property, whether by auction or private treaty.
If, however, in exceptional cases, such provisions are to be used in contracts for the sale of land/property, it should be on the basis that they cannot exclude liability for representations made by a vendor or its agents that were material in persuading a purchaser to decide to buy the property and, in particular, that liability for the accuracy of replies to formal pre-contract enquiries must be absolute and cannot be excluded by an entire agreement clause.
The committee would like to clarify at this time that the practice note published in May 2006 was not intended to apply to the sale/purchase of portfolios of residential properties.