chapter 3 negligent Flashcards
When asked for an opinion, which of the following actions would NOT be likely to relieve a licensee of liability for negligent misrepresentation?
- When asked for an opinion, a licensee refuses to give advice or an opinion on the subject matter.
- When asked for an opinion, a licensee gives an opinion that they believe is correct in order to encourage a rapid sale.
- When asked for an opinion, a licensee gives an opinion with a clear qualification that they accept no responsibility for the accuracy or reliability of the opinion.
- When asked for an opinion, a licensee directs the person asking for an opinion to someone who is a subject matter expert.
Correct Answer: 2
Option (2) is correct because a licensee giving an opinion, without clearly qualifying that they accept no responsibility for the accuracy or reliability of the advice, could be liable for negligent misrepresentation if the opinion if incorrect. Option (1) is incorrect because refusing to give an opinion would result in no opinion or advice given, which means the licensee could not have made any negligent misrepresentations. Option (3) is incorrect because a licensee giving advice or an opinion with a clear qualification that they accept no responsibility for the accuracy or reliability of the information could relieve the licensee of liability for negligent misrepresentation. Option (4) is incorrect because a licensee directing a person to an expert would not constitute negligent misrepresentation, as no representation was made by the licensee.
Sandra attended an open house held by Adele, the listing representative, at a lovely Tudor Style home. Sandra loved the house, but the price was at the very limit of her budget, so she wanted to be certain there would be no major repairs necessary to the house. She explained her concerns to Adele who immediately said, “Don’t worry, this house is as solid as the rock of Gibraltar, it is in A-1 mechanical shape!” Six months after Sandra bought the house, the foundation on one side collapsed involving $15,000 worth of repairs to make the house habitable. Which of the following statements is/are TRUE?
a. Adele cannot be liable to Sandra because Adele was the agent of the vendor and not the agent of the purchaser.
b. Adele’s comments to Sandra involved opinions and not statements of fact and therefore no liability for negligent misrepresentation can be imposed on Adele.
c. On the basis of the facts in this problem, Adele may very likely be liable to Sandra for negligent misrepresentation.
d. If Adele had told Sandra that she should not rely on Adele’s opinion because Adele did not have knowledge of the condition of the house, then Sandra could not hold Adele liable for negligent misrepresentation.
- A, B, and D only
- C and D only
- C only
- B and D only
Correct Answer: 2
Adele can be liable in tort to the purchaser because she has a duty not to misrepresent the condition of the house or property. This duty exists in tort law and as well as under the Real Estate Rules. Both Adele and the vendor may be liable to the purchaser: the vendor is vicariously liable for any wrongful actions of the agent, and the agent is personally liable for their own wrongdoings. If Adele’s comments may be regarded as “expert”, she is liable to the purchaser for inaccurate statements of opinion as well as of fact, unless she qualifies her statement with a disclaimer as in Option (D).
Interested in constructing a Piano Hall of Fame, Schroeder inspected a 10-acre piece of property which was listed for sale by the owner. After looking over the property, he sought the advice of his friend Lucy who was a real estate licensee. Lucy stated that the area would be an excellent location for a tourist attraction, but advised Schroeder not to rely on her opinion, as she was unsure about the development restrictions applicable in the area. Without checking any further into the matter, Schroeder promptly bought the property for the express purpose of the building the Hall of Fame; he subsequently learned that the land was located in an agricultural land freeze area and could not be developed for the purpose of a tourist attraction. Which of the following statements is TRUE?
- Lucy owed no duty of care to Schroeder because she was only giving advice as a friend.
- Lucy’s qualification of her statement effectively released her from any liability.
- Schroeder can reasonably sue Lucy for negligent misrepresentation because she had a duty, as a professional in the area, to take all reasonable care that the information she supplied to him was correct.
- Schroeder cannot sue Lucy for negligent misrepresentation because there was no contractual relationship between them.
Correct Answer: 2
Option (2) is correct because where a skilled person gives advice in the course of their business to a person who is reasonably going to rely on that advice, a special relationship giving rise to a duty of care will be created. Accordingly, the skilled person will be liable for any negligent misrepresentation unless the advice or opinion was given with a clear qualification that they accepted no responsibility for the accuracy or reliability of the advice. In this case, Lucy’s rendering of advice as a licensee gave rise to a duty of care towards Schroeder; however, since she clearly qualified that statement, he will not be able to sue her for negligent misrepresentation.
Licensees have been found to be negligent in which of the following situations?
a. A licensee does not verify information in the listing agreement
b. A licensee fails to conduct a title search of the listed property
c. A licensee fails to recommend to the purchaser that the purchaser insert a “subject to financing” clause in an offer to purchase
d. A licensee fails to disclose material facts to the vendor about the purchaser’s ability to buy the property
- A, C, and D only
- A, B, and C only
- B and D only
- All of the above
Correct Answer: 4
Option (4) is correct because licensees have been found negligent in all of the listed situations.
