Excluding liability for misrepresentation on sale of residential property

A misrepresentation is a statement that induces entry into a contract and that turns out to be false. English law recognises three different types of misrepresentation: fraudulent, negligent and innocent. It is possible to exclude or restrict liability for misrepresentation (although not fraudulent misrepresentation) although such a clause will be subject to the Unfair Contract Terms Act 1977 (UCTA). Section 11 of UCTA subjects any such clause to a test of ‘reasonableness’. It is for the party seeking to rely on the clause to show that it is reasonable.

A body of case law has built up around what is reasonable. Schedule 2 to UCTA provides a list of relevant considerations, including the respective bargaining positions of the parties, whether any inducement was given to the purchaser to agree to the term and whether the purchaser knew or ought reasonably to have known of the existence and extent of the term.

In the context of sales of residential property, a very relevant factor in determining the reasonableness of a clause excluding liability for misrepresentation will be whether the clause appears in standard terms or whether it was separately negotiated…

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