11. Before I buy the flat, I find out that my agent gave me false information or he forgot to tell me some important information about the flat. Can I terminate the provisional agreement and sue my agent (and his employer) for compensation?
A client's interests are NOT ONLY protected by the estate agency agreement. In addition to the terms as set out in the agency agreement, your interests (no matter whether you are the vendor or the purchaser) are always protected by statute laws as well as the Common Law. These laws tackle some kinds of misconduct that might be committed by estate agents e.g. misrepresentation and negligence.
Misrepresentation (Misleading Information)
A person who had made a false statement of fact which induced another person to enter into a contract would be guilty of making a misrepresentation. The three pre-requisites for misrepresentation are: i) someone has given a statement of fact, ii) that statement is wrong, and iii) that false statement induced (i.e. persuaded) the victim to enter into a contract.
Note that a "statement of fact" is different from a "statement of opinion". For example, an agent would only have given a statement of opinion if he told you that the bedroom may accommodate a piano and a bed, and asked you to take some measurements of your own afterwards. However, he would have made a statement of fact if he told you that the size of the bedroom is 150 sq. feet. The agent would be liable for misrepresentation if you signed the provisional agreement after hearing his statement, but subsequently discovered that the actual size of the bedroom is only 100 sq. feet.
In order to incur liability for negligence, 3 conditions must be satisfied: i) one party owes a "duty of care" to the other party, ii) the former has breached the duty, and iii) the latter has suffered loss due to such breach of duty. The concept of duty of care comes from a well-known British case (Donoghue v Stevenson) which states that everyone should take reasonable care to avoid acts or omissions which are likely to injure his neighbour. The word "neighbour" does not simply include the person living next door to your home. It generally covers any persons who are likely to be affected by your activities.
In the context of property transactions, your agent would certainly owe you a duty of care because his conduct in handling your deal would affect your interests. Your agent would be negligent if, for example, he failed to carry out a proper inspection of the property and failed to inform you of the existence of a tenancy before you signed the provisional sale and purchase agreement.
You are entitled to sue your estate agent and his employer for compensation if it can be proved that your agent has committed misrepresentation or negligence. However, you may or may not be able to terminate the provisional sale and purchase agreement (or the formal agreement). This depends on the actual circumstances.
The following examples may help make the position clearer:
Example 1: The estate agent acts for both the vendor and you, and the vendor gives the estate agent false information which he passes on to you.
Answer: You can terminate the provisional sale and purchase agreement and get a refund of the deposit. You can also sue the vendor for compensation.
Example 2: The estate agent acts for both the vendor and you, and he passes on false information to you other than on the instruction of the vendor.
Answer: Even if the vendor does not know what the agent has said, that agent is also acting on behalf of him and you have relied on the agent's information in signing the agreement. Besides suing the estate agent for compensation, you may terminate the provisional sale and purchase agreement and get a refund of the deposit.
Example 3: The estate agent only acts for you but not the vendor, and makes a false statement to you about the property.
Answer: Unless you are prepared to give up the deposit, you cannot unilaterally terminate the provisional sale and purchase agreement since the vendor is not responsible for what the estate agent said. You should sue your estate agent directly for compensation.