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Home / Questions / Are Disclaimer of Reliance Clauses a License to Lie? David Sarif and seven other purchaser...

Are Disclaimer of Reliance Clauses a License to Lie? David Sarif and seven other purchasers (Purchasers) each bought a unit at the 26-story Twelve Atlantic Station (Twelve) condominiums in 2005

Are Disclaimer of Reliance Clauses a License to Lie?

 

David Sarif and seven other purchasers (Purchasers) each bought a unit at the 26-story Twelve Atlantic Station (Twelve) condominiums in 2005 and 2006. They sued the developers and the brokers for fraud in the inducement and negligent misrepresentation. They alleged that at the time of their purchases, the developers were advertising "spectacular city views" of Atlanta while they had already undertaken to develop the 46-story Atlantic Station tower directly across the street, and that their brokers were advising the Purchasers that any future development to the south of Twelve would be low- to mid-rise office buildings. Purchasers allege that they paid substantial premiums for their views of the city from the south side of the building, which is now blocked by the 46-story building. Each Purchaser signed an agreement containing a provision stating that "[t]he views from and natural light available to the Unit may change over time due to, among other circumstances, additional development and the removal or addition of landscaping"; a disclaimer at the top of the first page as required by the Georgia Condominium Act stating that "ORAL REPRESENTATIONS CANNOT BE RELIED UPON AS CORRECTLY STATING THE REPRESENTATIONS OF SELLER"; an express disclaimer in which Purchasers affirmed that they did not rely upon any representations or statements of the brokers; and a comprehensive merger clause. The Court of Appeals reversed the trial court's judgment for the defendants, and the Georgia Supreme Court granted certiorari.

 

JUDICIAL OPINION

 

HUNSTEIN, C. J.... It is well-settled law in Georgia that a party who has "the capacity and opportunity to read a written contract cannot afterwards set up fraud in the procurement of his signature to the instrument" based on oral representations that differ from the terms of the contract. Craft v. Drake, 260 S.E. 2d 475 (1979). Statements that directly contradict the terms of the agreement or offer future promises simply cannot form the basis of a fraud claim for the purpose of cancelling or rescinding a contract. Id. In fact, the only type of fraud that can relieve a party of his obligation to read a written contract and be bound by its terms is a fraud that prevents the party from reading the contract.

 

In Craft, the plaintiff alleged that a bank officer fraudulently induced him to execute certain notes by misrepresenting that plaintiffs home would not be used as collateral for the note. However, the express terms of the note specifically stated that the holder would have a security interest in any property held by the plaintiff at the time of execution or subsequently acquired. The Court held that because the oral misrepresentation was directly contradicted by the language of the agreement and because the statements were promissory in nature as to future acts, the plaintiff was bound by the terms of the note he signed. See Craft, 260 S. E.2d 475.

 

The crux of Purchasers' argument here is that they are not bound by the terms of their agreements because Brokers promised "spectacular city views" from the south side of Twelve at the same time that Developers were moving forward with plans to erect a 46-story condominium across the street that would ultimately block Purchasers' views. Nevertheless, Purchasers all signed agreements that expressly state that the views may change over time, oral representations of the sellers could not be relied upon, Purchasers did not in fact rely upon any oral representations or statements of Brokers, and the entire agreement between the parties was set forth in the terms of the written contract.... There is no allegation in this case that Developers or Brokers tried to prevent the Purchasers from reading the terms of the agreements. Rather, the alleged misrepresentation upon which Purchasers premise their fraud claim is simply a promise regarding future events specifically a promise that their views would not be blocked. However, this Court made clear in Craft that future promises are not sufficient to sustain fraud-based claims. Purchasers are not entitled to back out of a written agreement whose terms expressly contradict the oral representations on which Purchasers claim to have relied. Accordingly, the Court of Appeals erred in holding that Purchasers were not bound by the agreements they signed....

 

Justifiable reliance is an essential element of Purchasers' fraud [and] negligent misrepresentation ... claims. See ... Real Estate Intl., Inc. v. Buggay, 469 S.E.2d 242 (1996) (justifiable reliance is essential element of negligent misrepresentation claim). Since Purchasers are estopped from relying on a representation outside of the agreement, they cannot sustain any of the causes of action that require justifiable reliance. Therefore, the fraud [and] negligent misrepresentation ... claims fail, even construing the pleadings most favorably to Purchasers.

 

Reversed.

 

Knowing that the purchase and sales agreements contained contractual devices designed to negate the element of fraudulent reliance, and thus preclude fraudulent inducement lawsuits, were the developers and brokers accordingly given a license to lie?

Aug 12 2021 View more View Less

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