Glenn Archambault and Terri Magruder (“Buyers”), a husband and wife, submitted an offer (“Offer”) to purchase two parcels of land from Howard Ogier and Phyllis Ogier (“Sellers”). The two parcels were next to each other, one containing a home and the other barn. During the course of the transaction, the Buyers received a disclosure statement which stated that the Sellers knew of no defects on the property affecting the property’s value. The disclosure statement also stated that the Buyers should not rely on the representations in the disclosure statement and understood that they should exercise reasonable care in entering into the transaction. The Buyers signed the disclosure statement, agreeing to its terms.
The Offer contained statements in which the Sellers represented that the property’s water source, an onsite well, and plumbing were in good working order. The Offer also stated that it was not contingent upon approval by the Buyers of the Sellers’ disclosure form. The Offer also contained several other conditions, including the Buyers approval of well water tests paid for by the Buyers. The well water tests were performed, and the Buyers approved the results. The transaction closed in 1993.
Following the closing, the Buyers learned that the well did not produce sufficient water, the septic system did not operate properly, the two properties were not separately buildable, and the solar hot water system/hot tub did not operate properly. In 1999, the Buyers filed a lawsuit against the Sellers alleging breach of contract. The Sellers argued that the Buyers’ allegations in the lawsuit were for misrepresentation and not breach of contract, and so the Buyers lawsuit should be dismissed because misrepresentation allegations are subject to a two year statute of limitations. The trial court agreed with the Sellers and dismissed the lawsuit. The Buyers appealed.
The Court of Appeals of the State of Oregon reversed the trial court. First, the court looked at the disclosure statement. The court agreed with the Sellers that the Buyers had waived their right to rely upon the disclosure form and so could not rely upon the disclosure statement as the basis for a breach of contract lawsuit. Therefore, the only basis for the Buyers’ breach of contract allegations could be the representations made in the Offer. The Sellers argued that Offer’s representations could only be the basis of a misrepresentation lawsuit, and so were barred by the statute of limitations.
The court stated that simply because the lawsuit involves representations it does not automatically require the lawsuit to contain allegations of misrepresentation. The issue before the court was whether the liability resulted from the negligent performance of contractual obligation or breach of a contractual obligation. Here, the representations contained in the Offer were that the septic system was in working order, the well was in working order, and the other appliances on the property were in good working order. In their lawsuit, the Buyers alleged that the condition of the premises did not conform to the representations contained in the Offer. Since the allegations centered on the Sellers’ failure to deliver the premises as represented in the Offer, the allegations focused on the Sellers contractual obligations and so the court ruled that the Buyers had properly alleged a breach of contract. The statute of limitations for breach of contract was six years, and so did not bar the Buyers’ lawsuit. Thus, the court reinstated the Buyers’ lawsuit and sent the matter back to the trial court for further proceedings.
Archambault v. Ogier, 95 P.3d 257 (Or. Ct. App. 2004).
Editor’s Note: Thanks to Matt Farmer of the Oregon Association of REALTORS® for alerting Legal Affairs to this decision.