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2011 August 11: MISREPRESENTATION OF THE PRODUCT ON OFFER CAN LEAD TO THE CONTRACT BEING CANCELLED

Anton du Plessis, CEO of Vineyard Estates, has drawn attention to a recent High Court case (involving an auctioneer and Netluk Boerdery cc and Another) in which the plaintiff’s plea that he had not fully understood the contract was taken as grounds for allowing him to opt out of it.

“The Smith Tabata Buchanan Boyes property law update on this subject,” said du Plessis, “is particularly enlightening:  they state that the rule applicable here is that if a man is induced to enter a contract by a false misrepresentation, he cannot be held to it on the grounds that if he had exercised due diligence he would have picked up the fact that certain statements were not true.”

This is very much in line with the new Consumer Protection Act and estate agents, being part of the “supply chain” could also be held accountable for misunderstandings, especially if they are, possibly due to ambiguous wording.

In the case discussed, Netluk agreed to pay R50 million for a Garden Route property advertised as having 71 completed two and three bedroom homes “with full services and ready to go” and 62 serviced stands.  Netluk also signed a provisionary clause saying that “notwithstanding the fact that the auctioneer has not read out every clause in the contract, I will legally comply myself with all my obligations, etc.”.

At the time these conditions of sale were signed, the Netluk representative questioned the auctioneer on the state of the houses and was told that everything was as stated in the advertising and auction documents “with perhaps a loose tile here and there”.

On actually visiting the site the Netluk executive found that 20 of the 71 units were not completed and some still needed major work, that the property had no boundary walls and could not, therefore, be described as advertised as a security estate, that there were no services on 62 stands and that certain other claims made in the auction papers were not valid.

The court ruled in favour of Netluk and condemned the auctioneers not only for misrepresentation but for using the “if due diligence had been exercised” argument to place the blame on Netluk.