G. Entire Agreement and Exemption Clauses

• Author: John D. McCamus
• Profession: Professor of Law. Osgoode Hall Law School, York University
• Pages: 354-359

Page 354

As we have seen, misrepresentations of fact that induce agreements may give rise to a variety of remedies, including equitable rescission for misrepresentation and damages in tort where the misrepresentation is fraudulent or negligent. As we shall see,¹³⁰if the representation can be characterized as a binding collateral warranty, the various remedies for breach of contract become available. Understandably, drafters of agreements exhibit an inclination to include provisions that seek to limit or exclude these types of liabilities. The success of such provisions in achieving these objectives will require a careful construction of the actual language of the provision. Further, however, in the interpretation of such clauses, courts appear to be influenced by a consideration

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as to whether the particular clause has been drawn to the attention of the representee. Thus, in Hedley Byrne¹³¹itself, the defendant was excused from liability by virtue of the fact that the defendant bank had, when rendering the advice in question, explicitly stated that the advice was "for your private use and without responsibility on the part of the bank or its officials."¹³²The arguments for excusing the defendants in such circumstances are obviously compelling. It is reasonable for the representor to assume that he will not be held responsible for the veracity of the statement and unreasonable for the representee to attempt to impose liability. The significance of the disclaimer becomes much more difficult, however, if it is to be found only in the subsequent agreement entered into between the parties. Indeed, one commentator has suggested that a disclaimer found in the ultimate contract arrives too late to be of any assistance to the defendant inasmuch as the representation has already had the desired effect of inducing the buyer to enter into the agreement.¹³³The trap has already been set and triggered. If the contract contains a disclaimer clause, it is simply a better trap. It seems rather more likely, however, that the courts will simply construe the contractual disclaimer with a view to determining whether it truly operates as a release of the representor’s liability for the prior tort and there is some evidence for this in the recent case law.

Where the disclaimer is found in the subsequent agreement, the courts evince a concern to determine whether the representee has had adequate actual notice of the significance of the representor’s disclaimer. In Roberts v. Montex Development Corporation,¹³⁴for example, the condominium purchase agreement included a clause to the effect that "it is understood and agreed that there are no representations, warranties, guarantees, promises or agreements other than those contained in this agreement." This provision was held to be ineffective to exclude tort liability because the plaintiff "had no independent legal advice before signing the interim agreement" and the judge was satisfied "that the escape clause meant nothing to her - if she read it, which I doubt."¹³⁵Similarly, in Beer v. Townsgate I Ltd.,¹³⁶the Ontario Court

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of Appeal declined to give effect to an entire agreement clause where agreements for the sale of condominium units were entered into in a "frenzied" atmosphere in which there was no effective opportunity to read the clause and, accordingly, no reasonable expectation on the part of the seller that the purchasers had assented to the clause. In another Ontario case,¹³⁷however, the court was prepared to give effect to a similar contractual disclaimer, but appeared to place great weight on the fact that the plaintiffs had, prior to signing the document, received advice from their lawyer to the effect that they were "taking an awful chance"¹³⁸in signing a document that so severely restricted the defendant’s liabilities.

In Sodd Corporation Inc. v. Tessis,¹³⁹and in the decision of the Supreme Court of Canada in Carman Construction Ltd. v. Canadian Pacific Railway Co.,¹⁴⁰ disclaimers that were made available to the plaintiff at the time of the initial statement were the subject of analysis. In Sodd v. Tessis, the disclaimer was afforded little significance. A disclaimer appeared in the advertisement for sale by tender published by the trustee in bankruptcy and stated the following: "Tenders will be accepted on the basis that the purchaser has inspected the assets and title thereto, and no warranty or condition is expressed or can be implied as to designation, classification, quality or condition or in any manner whatsoever."¹⁴¹The trial judge expressed the view, and the Court...