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The justices of the Massachusetts Supreme Judicial Court have agreed to hear a case that puts at issue what many lawyers, until now, had thought to be a well-accepted interpretation of a critical paragraph of residential purchase and sale agreements.  On March 5, 2012, the SJC granted further appellate review in the case of DeWolfe v. Hingham Centre, Ltd., 80 Mass. App. Ct. 765 (2011).  At issue in this case is the interpretation of the exculpatory clause found in the Greater Boston Real Estate Board’s standard form purchase and sale agreement, which reads as follows:

The BUYER acknowledges that the BUYER has not been influenced to enter into this transaction nor has he relied upon any warranties or representations not set forth or incorporated in this agreement or previously made in writing, except for the following additional warranties and representations, if any, made by either the SELLER or the Broker(s):  [Emphasis added.]

One of the issues in DeWolfe was whether certain representations “previously made in writing” by a real estate broker survived this language.  The plaintiff in DeWolfe, Daniel DeWolfe, claimed that he purchased property based on the written representations of a real estate broker that the property was “[z]oned Business B.”  After purchasing the property, DeWolfe learned that the property was in fact in a Residential B district, and, therefore, not suitable for a business DeWolfe had planned to operate on the property.  DeWolfe then sued the listing broker for the property.

The purchase and sale agreement by which DeWolfe purchased the property contained the standard exculpatory language, as set forth above.  In the blank space which followed this language, the parties to the agreement added the word “NONE.”  A five judge panel of the Massachusetts Appeals Court split on the meaning of the exculpatory clause, and, therefore, whether DeWolfe could base his claims against the defendants on representations previously made in writing.  The majority opinion held that DeWolfe could base his claims on representations previously made in writing, stating that, “while an exculpatory clause was included in the warranties and representations section in the standard form purchase and sale agreement used by the parties, it explicitly excludes representations previously made in writing.”  In reaching this opinion, the majority emphasized that the language of the exculpatory clause was, “plain.”  Notwithstanding the apparent plain meaning of the exculpatory language, two judges of the Appeals Court (including the Chief Justice) reached an opposite conclusion.  These two judges read the exculpatory clause as excluding, “the buyer’s reliance on representations previously made in writing” that are not listed in the purchase and sale agreement.

A final verdict on the interpretation of the exculpatory language will have to wait the SJC’s decision.  The SJC’s decision in this case could have far-reaching implications for real estate brokers and buyers and sellers of properties.

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