The above term is often used in the Agreement of Purchase and Sale; but what is the effect of it on representations and warranties?
In the Court of Appeal case of “Beatty v. Wei” found that despite a Seller’s representation during the time they had owned a property, that the property had not been used as a grow op, the effective date of the truth of the representation made to “the best of the Seller’s knowledge and belief” was at the time that the representation was made. Without the language in the clause that the representation continued until closing, the representation did not continue, and, in this case, it was discovered that the property had in fact been used as a grow op at some time prior, but that fact was unknown by the Seller and the Seller was not liable. The emphasis to be placed on representation is the knowledge of the Seller when the representation was given and not on whether the property had been used as a grow op.
The representation given was limited to the Seller’s knowledge at the time given and was not absolute.
If the Buyer wants the representation to apply up to the date of closing, the Agreement of Purchase and Sale should be written to include this timeframe. Since the clause did not reflect “up to the date of closing”, the representation only applied to the date of execution of the Agreement of Purchase and Sale.
We all rely on “to the best of my knowledge and belief” in our agreements, so it is important to realize that without language that makes the knowledge apply to the date of closing, the effectiveness of the representation is limited to the date it is given. Even if the Buyer finds out prior to closing that there was a grow op, the Buyer does not have the right to terminate the Agreement of Purchase and Sale.
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