Written By Andrew Dunncliff

A statement by a real estate sales agent to a potential purchaser or in advertising may be only sales talk (called “puffery”) or it may actually be a statement of fact.

Sales talk is language used that no reasonable person should take literally and rely on. “A charming house in a sought after area” is an example. Such a puff is not a misrepresentation and a purchaser should not rely on it to rescind a sale contract prior to settlement or seek damages, but when does puffery ‘cross the line’ and actually become a misrepresentation of fact?

A statement that vacant land is “a wonderful place to live” is not puffery as it actually conveys the impression that the land is zoned suitable for residential use and if it isn’t, is a false statement of fact.

A Court previously considered the words “nothing to spend – perfect presentation” in a case concerning a house sale advertising brochure. The purchaser sued the seller arguing that this statement induced them to enter into the purchase contract as they thought that the house would be structurally sound. The Court disagreed with the purchaser saying that a reasonable potential purchaser would not understand those words as conveying a representation of fact about the structural integrity of the property.

Also, a misrepresentation is one thing but reliance on it is another. If a purchaser did not rely on a false statement (e.g. that the land was actually zoned for residential use) then the purchaser may have no right to terminate the contract or claim damages. Another person however (perhaps less experienced as to land zoning) might justifiably rely on such a representation. It therefore depends on first, a misrepresentation being made and secondly, reliance by the recipient on that representation, to justify a contract termination and/or damages. Each fact situation must therefore be considered on its own facts and legal advice obtained before taking any action to terminate a contract and/or claim damages. Also, if as a seller or sales agent you become aware that a representation you made was not true then you should seek legal advice as soon as possible in order to try and minimise the risk of a subsequent contract termination and/or claim for damages. It may be possible to advise (say a purchaser) prior to settlement of the incorrect representation and give them a further opportunity to “cool off” on the purchaser contract.

The take-away from this is for sellers and their sales agents to take care that “sales talk” or advertising doesn’t cross the line and become a misrepresentation on which a purchaser can rely to terminate a contract and/or claim damages.  There is also the potential for other persons (and not just the purchaser) to claim damages if the misrepresentation also caused them loss.

If you would like any further information or to arrange a meeting with any of our Property Lawyers in relation to this topic or other property matters, please contact the office on (08) 8206 8444 or email legal@commercialandlegal.com.au.

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