Luxury houseboats and entire agreement clauses
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The High Court recently found that a seller of luxury houseboats was liable for misrepresentation and breach of contract, since an entire agreement clause did not exclude promises made in the run up to the sale.
In Djurberg (t/a Hampton Riviera) v Small (unreported, Ch D, 1/9/17), Mr Djurberg, the owner of Hampton Riviera Marina, agreed to sell two luxury houseboats in two separate transactions. These sales were made on the understanding that the boats would benefit from 125 year mooring licences. In reliance on these representations the two families moved into the vessels, selling their old homes. After a short period of residence the families were billed multiple times for the licences and it transpired that neither boat could be permanently moored at the marina; there being no appropriate planning permission. Both families were required to move out and seek rental accommodation. They subsequently claimed damages for misrepresentation and breach of contract from Mr Djurberg.
Mr Djurberg, in defence, stated that he could not be held liable for breach of contract because the oral promises in respect of the mooring licence were excluded by the entire agreement clause in the contract.
The court disagreed and found that the entire agreement clause could not be construed as excluding those discussions because:
- the contract did not encompass the entire agreement since the discussions were crucial to the decision to purchase;
- if it could be so construed it would be excluded under s8 Unfair Contract Terms Act 1977 as it sought to unreasonably exclude liability for misrepresentation; and,
- the pre-contract representations had become terms (Dick Bentley v Harold Smith) per the parties’ intentions, objectively ascertained.
In respect of the misrepresentation, court considered that Mr Djurberg had no reasonable grounds to believe that there were mooring rights, that the families had relied on his representations and that Mr Djurberg “was at least slippery” in failing to document the promises made.
Mr Djurberg was liable for breach of contract and misrepresentation. On the evidence there was no difference in amount between the two bases. The recoverable damages were best measured as the difference between what the families paid for the houseboats, and the values of the houseboats taking into account the prospect of obtaining alternative moorings.