When is P&S Warranty Disclaimer Not a Disclaimer?

The widely used Greater Boston Real Estate Board (GBREB) standard form of purchase and sale agreement has a disclaimer whereby the Buyer acknowledges that it has not relied on any warranties or representations made by the Seller or Broker.  And yet five Appeals Court justices could not agree on the meaning of that disclaimer (DeWolfe v. Hingham Centre, Ltd, 80 Mass App. Ct. 765 (2011)) and so the case has been taken up by the SJC for a final determination.

The actual language of the disclaimer set forth in the disputed P&S reads as follows: “The BUYER acknowledges that the BUYER has not been influenced to enter into this transaction nor has he relied upon any warranties or representations not set forth or incorporated in this agreement or previously made in writing, except for the following additional warranties and representations, if any, made by either the SELLER or the Broker(s): NONE” (Italics added).

In this case, the plaintiff–buyer, DeWolfe, wanted to expand his hair salon business in the Town of Norwell.  He had seen a listing for a property in the newspaper stating that the property was zoned Business B, a district allowing hairdressing as a permitted use.  When the broker, Hingham Centre, Ltd., showed the property to the buyer, he gave the buyer a copy of the MLS listing that again stated that the property was zoned Business B.  Based on the zoning information, the buyer bought the property and then discovered that the property was in a Residential B district, which prohibited the buyer from installing a six-station hair salon.

The plaintiff-buyer then sued the broker for misrepresentation but the Superior Court judge granted summary judgment to the broker based in part on the disclaimer set forth in the P&S agreement.

The Appeals Court’s original three judge panel agreed to uphold the Superior Court ruling 2 to 1, but when the panel was expanded to 5, the two new judges sided with the original judge who favored a reversal to create a 3 to 2 majority to overturn the lower court ruling.  The majority held that the disclaimer did not apply to warranties and representations either set forth in the agreement OR PREVIOUSLY MADE IN WRITING.  They believed that the listing in the newspaper and the MLS listing were representations previously made in writing and that the buyer was entitled to rely on the improper representation made by the broker regarding the zoning district in which the property was located.

The two dissenting judges read the disclaimer quite differently and opined that representations previously made in writing are covered by the disclaimer and so the buyer cannot rely on those prior writings to sue the broker.

The problem with the GBREB’s current form of disclaimer is that it contains too many negatives in its text, thus creating the ambiguity that divided the five Appeals Court justices.

The case is now before the SJC and its decision will have broad implications because of the widespread use of the GBREB standard form of purchase and sale agreement and the disclaimer language at issue.

I believe that the Appeals Court majority properly interpreted the disclaimer provision but the final verdict will come from the SJC.  No matter how the SJC rules, it would behoove the GBREB to revise its disclaimer provision so as to avoid the ambiguity and confusion that its current disclaimer clause possesses.