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September 2010

Classy But Misleading Brochure

More specific agreement for sale and purchase

A recent Court decision highlighted the risk of relying on a brochure regarding a development rather than carefully reading the formal agreement.

The Purchaser was impressed with the brochure for an intended apartment development, which emphasised the beautiful views. The Purchaser signed an Agreement for Sale and Purchase and awaited completion of construction. Upon completion, the Purchaser discovered a neighbouring roof obstructing the view of the apartment purchased.

The key question for the Court in the case that followed this disappointing discovery by the Purchaser was whether the misrepresentation made in the brochure meant that the agreement to purchase could be cancelled. Alternatively, would the Court require the purchaser to pay over the purchase price and buy an asset that did not live up to the initial expectations? The Court in this case said settlement must proceed.

The Court found that the Agreement contained detailed plans and specifications. These, when taken as a whole, showed the existence of the roof in front, and fully disclosed the exact situation. The Agreement included the standard provision that once signed, the Agreement was the binding and complete legal arrangement between the Vendor and Purchaser. In other words, the brochure was not to be taken into account when finally deciding what the terms of the contract were. As the Purchaser had the opportunity to take any legal or other advice available prior to signing, there was no reason, in the Court’s view, why the contract should not stand.

In the excitement of the purchase, who would have given a thought to the roof next door, particularly as nothing was constructed at the date of signing. In hindsight, the warning is clear and the principle applies to every signed sale and purchase agreement. Before you sign, obtain all the advice you can, because prior representations will usually not be a relevant factor. In this instance, not only legal advice was required, but specific architectural advice regarding the plans and specifications was also needed.