Before signing, the vendor told the purchaser in writing that no one else had any right of way over the property. The purchaser's lawyer now finds that the vendor granted a neighbour an unregistered right of way across the section. The agreement has no condition covering this. What is the purchaser's most likely position?
Correct Answer
A) The purchaser may cancel for misrepresentation if the effect on them is substantial
The vendor made a false written statement that no one had a right of way. That is a misrepresentation that induced the contract. Under the Contract and Commercial Law Act 2017, the purchaser may claim damages (s 35) and may cancel (s 37) if the effect is substantial, for example if the right of way substantially reduces the benefit of the contract. Silence alone would usually not be a misrepresentation; here it is the false statement that counts.
Why This Is the Correct Answer
The vendor's false written statement is a misrepresentation that induced the contract. If its effect is substantial, the purchaser may cancel under the Contract and Commercial Law Act 2017, or claim damages.
Why the Other Options Are Wrong
Option B: The purchaser must complete, because the right of way is not registered
Registration is beside the point. The vendor's false written statement induced the contract, which gives the purchaser remedies for misrepresentation.
Option C: The purchaser can seek a price reduction, but never cancellation
The Contract and Commercial Law Act 2017 allows cancellation for a substantial misrepresentation, not just damages or a price reduction.
Option D: The vendor has 10 working days to remove the right of way or the sale is void
No 10-working-day cure period applies, and a contract does not become void by itself. The purchaser must choose and act on a remedy.
Deep Analysis of This Sale Purchase Question
The question turns on what the vendor said, not on registration. In New Zealand a vendor's silence about a matter is usually not a misrepresentation, but a positive false statement is. Here the vendor said in writing that there was no right of way, and that induced the contract. Under the Contract and Commercial Law Act 2017 the purchaser can claim damages, and can cancel if the misrepresentation substantially reduces the benefit or increases the burden of the contract. An unregistered right of way may or may not bind the purchaser once they are registered as owner, but that does not undo the misrepresentation.
Background Knowledge for Sale Purchase
Misrepresentation remedies are in Part 2, subpart 3 of the Contract and Commercial Law Act 2017. Damages are available as if the representation were a term of the contract (s 35). Cancellation is available where the effect of the misrepresentation is substantial (s 37). Buyers usually protect themselves further through requisitions on title and vendor warranties in the standard agreement.
Memory Technique
If the vendor said it and it was false, the vendor owns the consequences. Silence is rarely enough, but a false statement that induced the contract is misrepresentation.
In a non-disclosure question, look for a positive statement by the vendor. If there is one and it is false, think misrepresentation and the Contract and Commercial Law Act 2017 remedies.
Exam Tip for Sale Purchase
Distinguish silence (usually no misrepresentation) from a false statement (misrepresentation). Cancellation needs a substantial effect; otherwise the remedy is damages.
Real World Application in Sale Purchase
A buyer of a lifestyle block asks the vendor whether anyone else can cross the land. The vendor says no, in an email. Before settlement the lawyer finds a signed right-of-way agreement with the neighbour that runs through the planned house site. Because the effect on the buyer's plans is substantial, the lawyer advises that the buyer can cancel for misrepresentation.
Common Mistakes to Avoid on Sale Purchase Questions
- •Treating a vendor's silence as misrepresentation
- •Thinking only registered interests can support a claim
- •Assuming price reduction is the only remedy
Related Topics & Key Terms
Key Terms:
More Sale Purchase Questions
A property is sold at auction for $850,000 with a 10% deposit required. The successful bidder has concerns about the LIM report after the auction. What is their legal position?
What is the primary purpose of a LIM (Land Information Memorandum) in the sale and purchase process?
What deposit is most commonly agreed in New Zealand residential sale and purchase agreements?
When does an Agreement for Sale and Purchase become unconditional?
In a property auction, when is the sale considered complete?
- → How is the settlement date set in a New Zealand residential sale and purchase?
- → What typically happens to the deposit when an unconditional sale and purchase agreement is signed?
- → During settlement, what document transfers legal ownership of the property from vendor to purchaser?
- → A property is passed in at auction for $800,000 with a reserve price of $850,000. The highest bidder approaches the vendor immediately after. Which statement is most accurate about the subsequent negotiation?
- → When does an Agreement for Sale and Purchase become unconditional if it contains a finance condition with a 10 working day timeframe?
- → What is the typical deposit amount required immediately after a successful auction bid in New Zealand?
- → Under the standard TLANZ/REINZ Agreement for Sale and Purchase, who is typically responsible for paying rates from the settlement date?
- → At an auction, the reserve is $800,000 but bidding stalls at $750,000. The vendor then negotiates with the highest bidder and they agree to sell at $780,000, signing on the auction terms with no conditions. What type of sale is this?
- → A purchaser has included a finance condition with a 10 working day deadline. On day 8, they receive loan pre-approval but final approval is pending. What should they do?
- → What happens if a purchaser fails to pay the deposit by the specified deadline in the Agreement for Sale and Purchase?
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