Legally Speaking - January 2010 (435)
News and Publications » Publications » Legally Speaking » Legally Speaking - January 2010 (435)
Share on Facebook
Share on Twitter
Search Legally Speaking:
Legally Speaking (435, January 2010)

 

Number 435, January 2010

When an Exclusion Clause is Not Exclusionary

In a recent decision, the purchasers of a residential home were awarded over $160,000 in damages from their home inspector for negligence arising out of a pre-purchase inspection.1 That negligence was found was not particularly unusual, but the treatment by the Court of the home inspector’s contract is enlightening.

The Court found that the home inspector had fallen short of the standard expected of a prudent inspector in not discovering rot and moisture, and structural instability in the house. Despite the fact that the home inspection contract provided that the inspection would be “performed in accordance with the Code of Ethics and Standards of Practice of the Canadian Association of Home and Property Inspectors”, the Court found that the standards of the national organization were only guidelines which, even if followed, did not preclude the Court from finding negligence.

Of greater interest, however, is the Court’s treatment of the home inspector’s standard contract which contained a number of exclusions and limitations of liability. For example, Section 9 of the contract was capitalized and in bold and stated:

“THE INSPECTION AND REPORT ARE NOT INTENDED NOR ARE TO BE USED AS A GUARANTEE OR WARRANTY, EXPRESSED OR IMPLIED, REGARDING THE FUTURE ADEQUACY, PERFORMANCE OR CONDITION OF ANY INSPECTED STRUCTURE, ITEM OR SYSTEM. THE INSPECTOR IS NOT AN INSURER OF ANY INSPECTED CONDITION.”

The Court dismissed that exclusion by finding that Section 9 did not apply to representations concerning the present adequacy or condition of any inspected structure. The Court concluded that as the representations in the home inspection report in this case were with respect to the current and not the future condition of the house, the exclusion did not apply to protect the home inspector.

By another section of the contract, the parties agreed that, should the home inspector be found liable for any loss or damages arising from his inspection, the liability of the home inspector was limited to the amount of the inspection fee—$450. Despite the fact that the buyers were intelligent, university educated people and had signed the contract, which included a statement that by signing the contract they acknowledged and agreed that they understood and agreed to be bound by the terms of the contract, the Court refused to enforce the limitation of damages clause.

The Court concluded that, as the home inspector knew (or ought to have known) that the buyers intended to rely upon the inspection report, it was incumbent upon the home inspector to draw to the buyers’ attention the exclusion and waiver clauses and to take reasonable steps to apprise the buyers of the onerous terms and to ensure that they read and understood them.

The lesson one can take from this case is that an exclusion clause in a signed contract will not always be effective to protect a professional from their own negligence. An expensive lesson for $450.

Brian Taylor
Bull, Housser & Tupper LLP

  1. Salgado v. Toth, 2009 BCSC 1515.
Back issues of Legally Speaking are available to REALTORS® on BCREA's REALTOR Link® homepage. Subscribers who are not REALTORS®, and who wish to see back issues, should contact BCREA by email at bcrea@bcrea.bc.ca, or by phone at 604.742.2784.
Legally Speaking is published eight times a year by email and quarterly in print by the British Columbia Real Estate Association, and funded in part by The Real Estate Foundation of British Columbia. Real estate boards, real estate associations and REALTORS® may reprint this content, provided that credit is given to BCREA by including the following statement: "Copyright British Columbia Real Estate Association. Reprinted with permission." BCREA makes no guarantees as to the accuracy or completeness of this information.
Copyright © British Columbia Real Estate Association
1420 – 701 Georgia Street West
PO Box 10123, Pacific Centre
Vancouver, BC  V7Y 1C6
Phone 604.683.7702
Fax 604.683.8601
www.bcrea.bc.ca
bcrea@bcrea.bc.ca
To change your email address or subscribe to more BCREA publications, click here.