May 10, 2021
By Tiffany Rene and Attorney Michael Finn
A non-reliance clause incorporated into a sophisticated commercial contract makes excellent sense in situations wherein both parties have input into the formation of the contract. Michael D. Finn, Esq.
Introduction by Tiffany Renee
A level playing field between the timeshare buyer and timeshare sales sharks doesn't exist. There are honest sales agents, but the bad actors are too good to be able to determine the good from the bad.I started researching non-reliance clauses after my elderly parents were pressured into giving up their deeded timeshare weeks that they had enjoyed for years. Their sales session lasted 11 hours. My mother called me during their ordeal. I told them to leave but my mother said they wouldn’t return their drivers licenses. They were told their maintenance fees would increase from $2,000 to $6,000 if they didn’t convert to points, and falsely claimed that I would be responsible if something happened to them. Fees increased to $6,000 because of the purchase.
The principle of asymmetric information explains why a timeshare sales presentation is unfair, especially for the elderly and the vulnerable. One of my parents’ sales agents, who introduced himself as a Quality Assurance agent, has the following criminal background that I found through a public records search. This skill set and the agents’ vastly greater knowledge provide the perfect example of asymmetry information. There were multiple counts of theft and burglary, some of which took place while violating probation. Public records were pulled from two counties: Orange County and Osceola County
· 1997 Seven burglaries, 4 year jail term served
· 1997 Six cases of theft
· 2001 aggravated assault and battery
· 2002 driving with a suspended/revoked driver’s license (Criminally charged for multiple offenses)
· 2008 Grand Theft third degree felony
· 2012 driving with a suspended license/no valid ID, a few of his speeding violations include: 74 mph in a 45 zone, 43/25, 75/55, 81/45, 84/55, 60/40, 100/65,including 7+ suspensions. His record shows neglect to pay for tickets or show up in court.
My motto is based on a concept of unjust enrichment that can be traced to Roman law and the maxim that “no one should be benefited at another’s expense”or “nemo locupletari potest aliena iactura or nemo locupletari debet cum aliena iactura.”
The non-reliance clause should be disclosed BEFORE signing up for a meeting or tour. The resort's response: "If you believe anything your sales agent says that can’t be verified in the contract, your complaint will be dismissed because you signed a contract and we’re not responsible for anything our sales people say.”
Non-reliance Clauses in Timeshare Purchase Contracts Buyer Beware!
By Michael D. Finn, Esq.
Precisely what do we mean by the term ‘non-reliance clause’? It is best described as a clause voluntarily included by each of the parties in a commercial contract. The clause itself seeks to confine the contract purpose and terms to stay completely within the written contract’s four corners.
The non-reliance clause seeks to prevent subsequent events, or other additional facts, that either of the contracting parties may later seek to retroactively include within the boundaries of the contract, to be expanded or expounded upon that party’s interpretation of the contract’s intent. It essentially says that any oral representations not expressly written, spelled out, and included within the printed contract itself, cannot subsequently be introduced into evidence as further or modified proof of either party’s motivation, intent or belief at the time the contract was formed.
A non-reliance clause incorporated into a sophisticated commercial contract makes excellent sense in situations wherein both parties have input into the formation of the contract. That clause will help to provide an extra degree of certainty as to contractual performance on behalf of both sides of the contract and minimizes the possibility that a contract will be voluntarily breached based upon the hope that one party can gain an advantage over the other by claiming that the written contract failed to contain the entire understanding of the contracting parties. This delayed assertion leads to the argument that allegedly relevant additions of oral statements should be allowed as extraneous evidence to supplement or modify the written contracting party’s intent when the contract was formed.
As may be imagined, the ‘can of worms’ that this scenario may well open, could easily lead to contractual obligatory uncertainty, thereby increasing costs of litigation, and injects an element of instability into commercial contracts. An inserted ‘non-reliance clause’ will, as a practical matter, essentially obviate or prevent that possibility.
Clearly, non-reliance clauses can play an important role in commercial contractual interpretations via eliminating ambiguity by requiring the contracting parties to ensure that all relevant clauses are included within its four corners in writing prior to execution. However, not all contracts are good candidates for ‘non-reliance clause’ inclusion. There are many variations of contracts, and likewise, different categories of contracting parties, depending on how significant a contractual transaction is to a particular party at a point in time. Factors, such as the amount of money involved in the transaction or the nature of the purchase may be quite relevant to how much time and attention is given by a party to ‘papering’ any particular transaction.
Some transactions are memorialized, if at all, by nothing more than a cash register receipt, and some solely by accepting a pre-printed receipt prepared on the spot, for example, for parking and retrieving your car in a commercial parking lot. Such events are so commonplace we hardly give them any thought, yet all fall into the broad category of commercial transactions, and each and every one can have unintended pitfalls and consequences by ignoring the contractual aspects of that transaction.
On the other side of the spectrum, commercial contracts can be very complex. Agreements can involve significant amounts of money wherein almost every written paragraph is custom designed by and for the specific parties. Each party is perhaps well and ably represented by business savvy lawyers. Every probable fact scenario is anticipated and included in contrast to the other extreme of casual everyday transactions like purchasing gas, lunch, parking, etc. You pay for parking in a self-park lot, you retain the keys, you come to retrieve your car and it has been damaged. What is the parking lot owner’s responsibility, if any? Any different if you turn your keys over to a valet? The correct answer may require a review of the small print on your parking or valet stub. Clearly for these smaller everyday commercial transactions, the business enterprise hosting the parking or ballpark open to the public will have already prepared a document that will spell out contract provisions important to them, like their limitation of liability. This innocent stub may well, upon acceptance, become your binding contract with that goods or services provider.
It is evident from examples like these, that legally enforceable contracts run the gamut from everyday consumer purchases of relatively inconsequential consumer items, all the way to complex multi-faceted commercial contracts wherein each clause has been thoroughly reviewed and re-reviewed by lawyers who are contract specialists. Each side of the transaction “crosses t’s and dots ‘i’s” to advance their client’s contract goals. As we sort out appropriate contract clauses, to include from our negotiating perspective, we must be mindful of each side’s amount of ‘skin in the game’ and their relative sophistication in terms of working knowledge of binding contractual obligations and their respective consequences.
Based on the above, it becomes clear that ‘non-reliance clauses’ are very important where each side has a lot riding on the transaction and each side presumably has a major role in the preparation of the written contract that will memorialize that transaction. Further, it also becomes evident that there are many more transactions that do not have, and arguably should not have ‘non-reliance clauses’, in part because of the vast majority of transactions where one side has a much greater role in papering the transaction and therefore is in a position to ‘stack the deck’ by including clauses that favor their position, and exclude, sometimes intentionally, the other party’s interests. Most of us would agree that this practice would be unfair to the unsuspecting other party.
In no other consumer orientated commercial transaction does this last point become as significant as it does in the purchase of a timeshare interest from the developer. The would-be timeshare purchaser/consumer is presented on the initial day of introduction with an already prepared, complex, multi-page purchase contract! That perspective purchaser has likely just endured an often a multiple hours long, feel good, short on facts, presentation from a salesperson who is purely commission driven. Further, the purchaser is not given the opportunity either to negotiate any provision or to even take the proposed contract away from the presentation location for further or professional review without first fully executing it. No changes or deletions are allowed. The purchaser can cancel the purchase contract during their relatively short rescission period, but more likely will still not have access to an attorney during the rescission period while on vacation away from home - nor will the issue be prominent in their mindset after the purchase (as due diligence is typically undertaken prior to, not after a purchase).
The closing process is structured and controlled by the developer in a scripted manner, discouraging the purchaser from raising any contractual issues during their closing, let alone attempt to add any provisions to the pre-printed purchase contract. Few purchasers, even those astute enough to recognize the inclusion of the always included ‘non-reliance clause’ in the pre-printed contract, would have the legal background to understand why such a clause can ultimately be very detrimental. It is simply not feasible for a purchaser to anticipate a common subsequent, after closing argument, that the multi-page purchase contract, that they may have barely had a chance to review, did not contain many, if any of the representations about the product made by the salesman - representations that may have been pure fabrications.
In the business community, there are not many restrictions on the ability to enter a contract; nor should there be if both sides are relatively sophisticated. Consumers, however, may or may not have sufficient dealings in the commercial world to know whether the pre-printed contracts, presented to them on a ‘take it or leave it’ basis, are in their long-term best interests. Their focus may simply be that this paper must be signed in order to complete a purchase that, at least at the time of the contract signing, is something that they desire.
There are consumer protection laws, in place federally and in every state, that are designed to protect an unwary consumer who may find themselves over their heads in a predatory transaction that they entered into in good faith but lacked the legal tools in place to protect themselves. The federal law, which is copied almost verbatim in most states, says that business practices that are deceptive or unfair are against the law. The issue becomes the enforcement of this laudable standard if the industry that stands to benefit from predatory practices has the available financial resources to put up legal and/or legislative hurdles and other unsavory techniques to maintain the advantage in an ongoing legal battle.
‘Caveat Emptor’ is a Latin phrase that has been in existence for nearly as long as commercial dealings themselves have existed. It translates into the English proverb, ‘Let the Buyer Beware’, and it is as relevant a term today as it ever was! When it comes to buying a timeshare, let the buyer beware indeed!
Respectfully submitted,
Michael D. Finn, Esq.
Timesharing Today produced the public service announcement about the weaponized oral representation clause. Please share with those you know BEFORE they go to a sales session.
