DECEPTIVE TRADE PRACTICES AND THE EFFECT OF CONTRACTUAL DISCLAIMERS

Frequently in the service industries, particularly those involving the consuming public, merchants will endeavor to add disclaiming verbiage to boilerplate instruments in which the buyer ‘acknowledges’ not having been misled by certain – and often very specific – misrepresentations. This practice is especially true in timeshare sales, where false promises of certain kinds of benefits are common. Among these are assurances that the timeshare can be ‘easily resold’, that it’s a ‘real estate investment’, that it will ‘appreciate’ in value, and that the buyer can ‘rent out’ the interest in order to defray costs of ownership.

Of importance, the savvy timeshare developer will often characterize the disclaimer as an ‘acknowledgment’ that such promises were not made during a given sales presentation. In this fashion, the seller hopes to absolve itself of false promises in spite of their utterance by, in effect, rewriting history. Thus, they’re not endeavoring to disclaim fraud, rather they’re getting the buyer to acknowledge the lack of fraud to begin with, regardless of what was actually said.

Indeed, one may well conclude that the more specific the type of statement the buyer ‘acknowledges’ not to have been uttered, the more likely it is to have actually been said. For the pattern of conduct and dealing during these transactions does not occur in a vacuum – the more involvement one has, the more one tends to see common denominators involving specific kinds of promises inducing sales in case after case. It’s a bit like a fox having a captive audience of farmers to ‘acknowledge’ that he hasn’t eaten any chickens while guarding the hen house. Is such a negation an effective shield from liability, regardless of how many chickens are missing?

Effective as a disclaimer clause may be to limit a contract right of action, it will not bar actions sounding in tort. Schroeder v. Hotel Commercial Co., 84 Wash. 685, 147 Pac. 417 (1915); Wells v. Walker, 109 Wash. 332, 186 Pac. 857 (1920). The underlying principle behind this rule might well be one of public policy. Courts have been reluctant to allow a party to a contract to completely disclaim all responsibility under any theory which the other party might advance. Consequently, it has long been the rule that although a vendor could bar a warranty action by disclaimer, an action based upon a fraudulent misrepresentation could not be so disclaimed. Wells at 337.

The existence of a written disclaimer is ineffective to negate fraud in the inducement Tinker v. De Maria Porsche Audi, Inc., 459 So.2d 487 (Fla. App. 3 Dist., 1984) review denied, 471 So.2d 43 (Fla. 1985). Neither can the parol evidence rule apply where there is an allegation of fraudulent inducement to a contract. Lou Bachrodt Chevrolet, Inc. v. Savage, 570 So. 2d 306, 308 (Fla. 4th DCA 1990). Moreover, “when fraud enters into a transaction to the extent of inducing a written contract, the parol evidence rule is not applicable” Marlite, Inc. v. Eckenrod case no. 10-23641-civ (S.D. Fla., 2012).

As a practice pointer, then, the consumer-plaintiff’s counsel will do well to characterize the cause of action as one sounding in tort rather than contract. Fraud-in-the-inducement, of course, will often be the tort of choice. Moreover, this cause of action also dovetails into a statutory cause of action based in the consumer protection statutes on the books of many states. Unlike the common-law cause, these will generally have more teeth to them, including provisions for the award of attorney fees and costs where the plaintiff prevails. Examples include Florida Statute Section §721. et seq., a timeshare-specific statute with consumer-protection features.[1] In addition, most states will have a generic consumer protection statute such as Fla. Stat. §501, et seq., which generally prohibits unfair and deceptive business practices.[2] For a concise digest of these statutes on a state-by-state basis, a point of reference is NCLC’s 50 State Evaluation of Unfair Deceptive Practice Laws.[3]

[1] http://www.leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0700-0799/0721/0721ContentsIndex.html

[2] http://www.leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0500-0599/0501/0501ContentsIndex.html

[3] https://www.nclc.org/images/pdf/udap/udap-appC.pdf