The Entire Agreement
An “entire agreement clause” (AKA a “merger clause”) establishes that the final written agreement between the parties represents the entire agreement of the parties and that the parties are only relying on what is written in the contract. Sometimes referred to as the “4 Corners Rule,” the merger clause bars a buyer from relying on alleged misrepresentations not contained in the written agreement.
Alleged false representation issues commonly arise through the Seller’s Property Disclosure (SPD). Because of the Entire Agreement clause, the SPD must be incorporated into the PSA to be effective. (Also referred to as “attached” to the contract.). The SPD offers enormous protection to the seller. If a defect is disclosed in the SPD, the buyer is on notice of it and must perform its own due diligence to investigate the defect. Reliance on a seller’s repair receipts or representations can be dangerous. If a repair issue is important to the buyer, it is much better to investigate further before closing.
The entire agreement clause would also control, if there is a conflict between the multiple listing and the contract. For example, if the MLS says the refrigerator stays, but the contract says it does not, the entire agreement clause or four corners of the contract prevail.
In the 2023 GAR Purchase and Sale Agreement (PSA), it is at 4(e). Page 6
Entire Agreement, Modification and Assignment: This Agreement constitutes the sole and entire agreement between all of the parties, supersedes all of their prior written and verbal agreements and shall be binding upon the parties and their successors, heirs and permitted assigns. No representation, promise or inducement not included in this Agreement shall be binding upon any party hereto.
Disclaimer Protection for Brokers in the GAR Purchase and Sale Agreement
The GAR Purchase and Sale Agreement protects brokers and agents by requiring the seller and buyer to acknowledge that they have not relied on any representations of brokers related to certain information concerning the property. The disclaimer explicitly states that the broker has no duty to advise the buyer or seller on any matter relating to the property that could have been revealed, among other things, through a survey, title search, report on termites in the property (Official Georgia Wood Infestation Report), inspection by a professional home inspector or construction expert, utility bill review, an appraisal, inspection by an environmental engineering inspector, consulting governmental officials, or a review of the purchase and sale agreement and transaction by an attorney, financial planner, mortgage consultant, or tax planner.
The GAR New Construction Purchase and Sale Agreement offers similar broker and agent protections. It contains a disclaimer that states that the broker is not responsible to advise the parties on any matter including, but not limited to the following: building products and construction techniques; the necessity or cost of any repairs to the property; views from the property; mold; hazardous or toxic materials or substances; termites and other wood-destroying organisms; the tax or legal consequences of the contract and transaction; the availability and cost of utilities or community amenities; the appraised or future value of the property; any conditions existing off property that may affect the property; the terms, conditions, and availability of financing; and the uses and zoning of the property, whether permitted or proposed.
Claims Against the Broker for False Statements
In Georgia, a buyer has no claim against the seller’s broker for false statements made by the seller in the seller’s disclosure statement unless the seller’s broker knows the representations to be false. Neither can the buyer sue the seller’s agent for fraud when the seller fails to disclose concealed defects in the property.
When sellers’ agents are asked questions regarding the condition of the property, it is always a good idea to answer them in reference to the Seller’s Property Disclosure Statement Exhibit. So, for example, let’s say that a buyer asks if the roof on a particular property has leaks. The Seller’s Property Disclosure Statement Exhibit provides that the roof does not leak. To avoid any claim against the seller’s broker, it is always better to say, “The seller indicates in his Seller’s Property Disclosure Statement Exhibit that the roof does not leak,” rather than, “The roof does not leak.” Although a Seller’s Property Disclosure is not a requirement, it is clearly best for the protection of all parties, that an SPD be incorporated into the contract.
Ethical Responsibility of Brokers
If a seller makes a misrepresentation on a Seller Property Disclosure and refuses to correct it, the REALTORS® ethical obligation of honesty to the public requires that the broker/agent terminate representation of the seller.
Weissman, Seth. The Red Book on Real Estate Contracts in Georgia (pp. 762-767). BookBaby. Kindle Edition.
September 6, 2023
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