There can be more to a Contract than meets the Eye!

Earlier this month the High Court awarded damages for misrepresentation to the buyers of two luxury houseboats in the cases of Djurberg t/a Hampton Riviera v Small and Small and Johnston and Sydney v Djurberg t/a Hampton Riviera.

The buyers had seen advertisements which offered houseboats for sale at Hampton Riviera Marina on the River Thames (the “Marina”), with the prices including 125 year mooring licences at the Marina. The buyers sold their houses and bought the houseboats and moved into them. They requested the mooring licences from the seller, who sought to charge them a further substantial payment for mooring rights, which he said were not part of the purchase price. It transpired that there was no planning permission for houseboats to be used as permanent residences at the Marina and the buyers were unable to lawfully occupy the houseboats as their homes. They had to find alternative rental accommodation.

The buyers argued that they relied on the seller’s representation that the purchase price included 125 year mooring licences so they could moor their houseboats at the Marina and lawfully occupy them as their permanent homes. They also claimed that these representations became terms of the contract, despite the fact that the written contracts made no mention of long term mooring rights being granted or that the houseboats could be used as permanent residences at the Marina.

The seller claimed he did not promise residential mooring rights and that they were not included in the sales. The contract for the construction of one of the houseboats contained an “entire agreement” clause, which he argued precluded the alleged representations becoming terms of the contract.

The Judge held that the seller was fully aware that the buyers were selling their homes and buying the houseboats to permanently reside on them at the Marina and that was the “fundamental basis” for the sale and purchase of the houseboats. The marketing particulars also stated the houseboats were offered for sale with 125 year mooring licences. The buyers relied on the Seller’s promise and on the seller honouring that fundamental basis for the transaction and would not have bought the houseboats otherwise.

The seller could not grant or offer residential mooring licences as there was no planning permission for the Marina to be able to offer such a right. The Judge held that the seller had undoubtedly misrepresented the position and further that the representations had become contractual terms.

In respect of the entire agreement clause in the construction contract for one of the houseboats, the Judge held that the contract containing the clause only related to building the houseboat and not the whole of the wider transaction, to which the mooring rights were fundamental to the parties’ bargain. Therefore the clause did not exclude representations that the houseboat benefited from long term mooring rights.

However, even if the clause did apply it would be subject to the Unfair Contract Terms Act 1977 and the clause was unfair and unreasonable because the buyer was in a weak bargaining position and there had been no negotiation about the contract terms.

On the basis that the houseboats were worthless without long term residential moorings at the Marina or a suitable location, the damages awarded to the buyers were the price paid for the houseboats and moorings.

This case highlights that if you rely on a promise made by another party when entering into a contract, even if the contract does not contain a specific term to that effect, you may still have a remedy if the other party fails to honour that promise. Our Dispute Resolution Team recently successfully concluded a settlement in respect of a claim for misrepresentation where what our client got was not what they bargained for.

If you have any concerns about a contract you have entered into, or if you feel that another contracting party has not delivered on their promise, it is important to seek advice early since a claim can be lost by not taking action in good time.