A signed estate agency agreement is not an exception to caveat emptor
A worked RES examination question on caveat emptor misrep, from our Paper 2 bank — with the rule it turns on, and why each of the four options is right or wrong.
The question
Advising a buyer who found a defect after completion, an agent works through the situations in which the general rule of caveat emptor gives way — and is careful not to treat a signed estate agency agreement, which has nothing to do with the exceptions, as one of them.
Consider the following statements.
- (i) There is a latent defect that the seller knew about but concealed.
- (ii) An estate agency agreement has been signed in respect of the transaction.
- (iii) The seller (or agent) makes a misrepresentation to the buyer.
- (iv) There is a defect in the seller's title to the property.
The answer, and why
Answer: D
The rule. Caveat emptor gives way where: the seller concealed a latent defect he knew of; the seller or agent makes a misrepresentation; or there is a defect in the seller's title. A signed estate agency agreement is not an exception to caveat emptor.
Why D is correct. (i) the concealed latent defect, (iii) the misrepresentation and (iv) the title defect are recognised exceptions. (ii) is false — an agency agreement is not an exception.
The other options.
- A adds the false (ii), the agency agreement.
- C adds the false (ii) as part of an all-four set.
- B adds the false (ii) and drops (i).
Exam note. Exceptions to caveat emptor: concealed latent defect, misrepresentation, title defect. An agency agreement is not one.
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