Negligent Misrepresentation on Home Owner Contracts

OPINION
by George Rousos
Director
Industry Training Consultants
george@itc.nsw.edu.au

Statutory authorities must start exercising the same degree of care towards sellers as they do with buyers of properties.

It was discovered and found on The NSW Office Of Fair Trading’s website, no cooling-off period  applies to sellers of properties once contracts have been exchanged, sellers are generally bound to complete the agreement. (See the article "Sale Contracts" on the website of the NSW Office of Fair Trading)

Someone needs to remind the NSW Office Of Fair Trading, that a legal owner of property (having a legitimate interest on the sale of land) is not bound to any such transaction that allows a prospective buyer of land to change their mind (on a conditional contract) and rescind a contract.

To combat the problem of gazumping the so called "anti-gazumping legislation" was introduced in 1987 by the Unsworth Labor Government, just prior to state elections and without adequate consultation with interested professional bodies. This legislation was ill-conceived because of several ambiguities, omissions and deficiencies in the legislation. Unfortunately when that government lost that election the new Greiner Liberal Government did not repeal the "anti-gazumping legislation" immediately,this left conveyancing in a most unsatisfactory situation after two Supreme Court decisions held that the "anti-gazumping legislation" could not be validly complied with.

Recently after the repeal of the "anti-gazumping legislation", the Greiner Liberal Government introduced the "cooling- off legislation, which commenced on the 1st October, 1990 after the legislation had been passed through parliament the previous year, however, whilst the bills were being debated in committee in parliament, it was established by Minister Causley and the opposing leader at the time Paul Whelan,that the cooling off legislation wouldn't go far enough to protect purchasers of properties and exclude the legal obligation on vendors and agents.

The difficulties experienced in land transactions at the present time and still today,indicate very little can be achieved to rid conveyancing of the evil of gazumping and due to the complexity of the law under both commonwealth and state legislation, in particular the Trade Practices Act 1974 and the NSW Property Stock & Business Agents Act 2002, it is very unlikely that gazumping will ever be outlawed.

Once again, the Office Of Fair Trading are providing negligent advice to consumers, traders and tax payer's of NSW. I also find it so embarrassing, that fair trading have a range of laws they administer, one is the unconscionability legislation being the NSW Contracts Review Act. This was passed before the States and Territories were persuaded to pass their Fair Trading Acts which mimicked s 51AB of the Trade Practices Act. The Contracts Review Act has in fact been used quite a lot, like s 51AB, is also supposed not to be available in respect of ordinary business transactions .The courts have nevertheless taken a very generous view of what constitutes a non-business transaction and have provided relief in circumstances like in Amadio and Warburton under the Contracts Review Act, that is, the courts have allowed relief in respect of transactions with a distinctly business element to them. The remedies under this Act are again very flexible.

The focus of the Act is on "unjust contracts" which are defined by reference to a list of criteria. What is considered a matter of interest to the courts, is in the case where (i) any party to the contract (other than a corporation) was not reasonably able to protect his or her interests, and whether or not any provisions of the contract impose conditions which are unreasonably difficult to comply with or not reasonably necessary for the protection of the legitimate interests of any party to the contract.

The Act does not just focus on unconscionable bargaining tactics or inequality or pressure. It is also concerned with substantive unfairness such as harsh terms or an unfair exchange and deals with matters concerning the sale of land and the sale of goods and services.

When a contract is grossly one-sided a court may infer that a position or disadvantage existed and/or that it was unfairly exploited". 'One-sidedness" could include the appearance that the legal rights or remedies of the weaker party were excluded or that the weaker party has agreed to, read, or understood terms, when this is not so. Too often the stronger party will attempt to disclaim misrepresentation.

However, while the NSW Office Of Fair Trading continue to provide incorrect information about the relevant acts in which they supposedly administer on a day to day basis to all consumers traders and tax payers of NSW, the only party that will be attempting to disclaim misrepresentation under the Contracts Review Act, will be Fair Trading themselves.

Well may we say 'God Save the Queen'; because nothing will save the NSW Office Of Fair Trading, except what is on this blog.

Footnote:  Gazumping and Gazundering are mythical terms used in the real estate industry. The verb "gazump means to refuse to formalise a contract (legally binding) at the last minute in order of accepting a higher offer. Gazundering is where a buyer agrees a price for the property but then makes a lower offer, usually just before exchange of contracts.

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