Generally in land-scarce expensive-housing Singapore, buying a home is regarded as one of the biggest investments Singaporeans would ever make in their life. Substantial amounts of both time and money would have been spent engaging the real estate agents to either assist in house-hunt or for home owners to make time for prospective buyers to view their home that is intended for sale.

Competition in the industry is fierce and being highly driven and eloquent individuals, agents may sometimes put forth representations to their clients that may, to a certain extent, influence them to enter into a sale and purchase agreement upon their reliance on such statements being made by the estate agents.

Agreed that the ultimate objective is to clinch the exclusive and close the sale and purchase transaction as soon as possible but there are certain factors that estate agents must pay close attention to when selling their products. You may, in your being zealous, consciously or unconsciously, present a wrong fact or misstate something to your clients which your clients rely on and then subsequently suffer a loss. In other words, a misrepresentation of fact on your part has caused your clients' loss. A role reversal takes place and you now have your clients seeking compensation from you!

What is a Misrepresentation, the different types of Misrepresentations and how you can avoid from making one?

An action for misrepresentation arises under the law of tort. A Misrepresentation occurs when the Representor (Estate Agent) makes a false statement of existing fact with knowledge of its falsity and with the intention that the Representee (Buyer or Seller) should act on it with the result that the Representee does act on it to his detriment.

A false statement can be made either orally, in writing or by conduct. Any conduct designed to deceive another by leading one to believe that a certain fact exists is equivalent in law, as in morals, to be a statement in words that the fact does exist.

In other words, when you either tell, give written instructions to or act in such a manner towards your clients on something which you know is not true or wrong with or without the intention of causing your clients some form of harm as a result of him doing so, is tantamount to a misrepresentation.

There are 3 forms of misrepresentation; Fraudulent Misrepresentation, Negligent Misrepresentation and Innocent Misrepresentation.

Firstly, a Fraudulent Misrepresentation is one that is made knowingly by the Representor that it was false or if it was made without belief in its truth or made recklessly without regarding whether it is true or false. For instance estate agent A told the prospective buyers that the tenure of a landed property they are considering is freehold when it is actually one with a 99-year leasehold! A is guilty of making a fraudulent misrepresentation if he knows that the tenure is in fact a 99-year leasehold instead of it being freehold or he did not believe that the tenure of the house was freehold or he had made the statement without caring whether the tenure of the subject property is in fact freehold.

Secondly, a Negligent Misrepresentation occurs when a statement made by the Representor honestly believing in its truth (falling outside the scope of fraudulent misrepresentation) but without having reasonable grounds for so believing. Referring to the same example above, considering now that estate agent A, when informing the prospective buyers, honestly believed that the tenure of the landed property is freehold. But A had no reasonable ground to believe that it is such. A could have easily cleared his doubts by simply conducting a title search on the said property. In other words, A made an honest but careless representation to the prospective buyers about the tenure of the landed property.

The last category of misrepresentation is Innocent Misrepresentation. .Such misrepresentations are those made by a Representor, who honestly believed in its truth (therefore not fraudulent) and he is able to show that he has reasonable grounds to believe in its truth (therefore not negligent). In this instance, estate agent A believed that the tenure of the landed property is freehold and had conducted a title search to confirm the same.

Considering the above circumstances, it must be noted that as a general rule, a representation can be expressed or implied from one's conduct but it normally has to take an active form. The Representor must have actually said or done something before he can be taken to have made a representation.

Silence, however does not amount to a representation. Contracting parties are generally not obliged to disclose any information to the other party or even correct the other's misconception provided he himself had not induced the said misconception. A mere passive non-disclosure of the truth however deceptive in fact, does not amount to deceit in law. Absence of a contractual duty to speak, unless provided for in instances such as contract of insurance, means no such duty can arise in tort.

Hence, silence by one party, even in the face of an obvious misconception on the part of the other, will still not amount to a representation that the misconception is true although, in some cases, it may amount to a unilateral mistake.

As stated above, a misrepresentation must be a false statement of fact and not a mere broken promise. If words of the Representor are mere promises, then such cannot be the basis of an action in tort too. This means promises, which are not considered a term or condition to the contract, when not delivered cannot be the basis of an action in tort for misrepresentation.

There are however, certain exceptional cases where silence or non-disclosure can have legal consequences such as half-truths or where a change in circumstances occurs before or at the time of contracting which renders untrue a statement of fact made previously or under certain types of contract, the law imposes a duty to make full disclosure as in the case of insurance contracts.

As such, what are the remedies that the party so misrepresented, can claim against the Representor who made a misrepresentation?

Firstly, the parties may consider to rescind the sale and purchase agreement altogether. This avenue puts the contracting parties to a position as if the contract did not take place. It is as if the contract was terminated from the beginning and parties are put back into position that they were before the contract. Any goods or monies passed are returned to the respective original owners.

Secondly, the Representee could claim for damages from the Representor. Damages are actually monetary compensation for any losses suffered as a result of the misrepresentation.

Thirdly, the Representee could seek the Representor to indemnify them for losses suffered because of obligations and liabilities created by the contract that was induced by the misrepresentation. It must be noted that this remedy is relatively less costly than that of Damages as indemnity limits the claims for losses arising out of obligations, which are necessarily created under the contract.

In any case, to prevent the estate agent from getting embroiled in any potentially expensive and time-consuming legal proceedings for a misrepresentation made during a sales pitch, it would be wise to consider including an Exemption Clause as allowed under Section 3 of the Misrepresentation Act. It must be understood that the provision and inclusion of such a clause must be fair and reasonable considering what the parties to the contract knew or should know at the time the contract was made.

In conclusion, it is always prudent for parties to a sale and purchase agreement to exercise caution on the terms of the agreement, paying special attention to factual statements. The estate agents as Representors, bears the responsibility of verifying the truth not the clients as Representees. In other words, the Representor is liable for any misrepresentations if the Representees did not conduct any forms of checks or verifications and had relied on the representations of the Representor. It also advisable, that estate agents exercise caution in making statements during contractual negotiations and include an exemption clause in their contracts to safeguard themselves against any possible legal proceedings relating to the said contract.