A Commercial Expert and An Elaborate Marketing Scheme #254

Jun 01, 1996

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By Gerry Neely
B.A., LL.B.

An Ontario real estate salesperson made a number of material errors in an eighteen page brochure, prepared by him as part of an elaborate marketing scheme. Three of these, which led to particularly important misrepresentations, were sufficient to allow a buyer to rescind an accepted offer. The salesperson represented that he was an expert in commercial real estate listings, who had gained a reputation in his "one-year" as a salesperson, for the preparation of detailed marketing plans.

In a trial in which damages of $635,000 were awarded against the agency and the salesperson, the judge held that the salesperson had breached his duty to the sellers by failing to:

1. confirm in writing from the municipalities the three important representations in the brochure;

2. advise the sellers that the representations made by him as their agent in the brochure would be binding upon the sellers, and that misrepresentations made by him would give a buyer the right to rescind the contract;

3. insert a waiver or disclaimer in the brochure.

Number 1 elevates a prudent practice to a positive duty.

Had the salesperson obtained these confirmations the errors should have been discovered and the problems resolved.

The duties referred to in number 2 are surprising, since they appear to be matters of law, which should be the responsibility of the lawyer acting for the sellers. Perhaps all the judge meant in this case was, that if this advice had been given to the sellers, they might have paid more attention to the details of the brochure.

It is unlikely that this duty would apply to an ordinary residential listing, but where does one draw the line? Licensees do have some responsibilities as professionals, familiar with contracts dealing with real estate, to be aware of some of the consequences of their actions and to explain them to their principals. An example is, in my opinion, the duty of a licensee to advise a party intending to make a counter offer that if that is done, the other party has the right to revoke the offer.

The agency was liable for failing to adequately superviseits salespersons and for lacking a policy requiring waiver or disclaimer in the brochure. The reference to the disclaimer came asa result of a second brochure prepared by the salesperson when the first sale collapsed. It contained a very prominent disclaimer of liability.

This is not a common practice, but there is no doubt that adding a waiver or disclaimer can be of value to a seller. An instance of an effective disclaimer is discussed in Column #102 (April, 1987), which is repeated below.

"Above information is from sources believed to be reliable, but should not be relied upon without verification. N.R.S. assumes no responsibility for its accuracy."

The courts interpret disclaimers strictly against the person relying upon them as a defense. Therefore, the wording of the disclaimer must be carefully drawn, preferably by a lawyer acting for the client.

The judge's findings may be limited by the facts because the more expert the licensee, and the more elaborate the marketing strategy, the higher the duty.1

***

Column #249 referred to an assessment of tax by Revenue Canada of a licensee who waived his commission for an equivalent reduction in the sale price of property sold to a friend. That created correspondence and telephone calls with the single message, "Revenue Canada can't do that to us, we still have the right to work for nothing whether we want to or not." Discussions with a tax lawyer indicated that it must have been a peculiar transaction which led to this assessment, and speculation that perhaps there was some benefit to the salesperson.

***

A lawyer wrote to ask if there is any better way by which a deposit, in excess of a commission can be paid over in a timely manner to avoid a delay in registration which, in his case, almost gave the sellers the right to repudiate their sale. The sale involved a quick closing and barely sufficient time to have the consents of both the sellers and buyers delivered to the agency holding the deposit. His suggestion was that the agent or agents involved in the transaction have the parties sign the consents once an unconditional offer is accepted, or when the conditions have been removed from a conditional offer. These should be appropriate times since the names of the conveyancers acting for the parties must also be obtained for the sales record sheet.

  1. Samson v. Lockwood, 49 R.P.R., (2d) #18.

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