A. Introduction

• Author: John D. McCamus
• Profession: Professor of Law. Osgoode Hall Law School, York University
• Pages: 325-326

Page 325

When one party has induced another party to enter into an agreement by making a material statement of fact that is false, a variety of remedies may be available to the misrepresentee, both at common law and in equity. The principal remedy is that of rescission, which, if available, has the effect of unwinding or setting aside the agreement. The remedy of rescission is available only if the parties to the agreement can be restored to their initial position in the sense that there must be possible a giving back and a taking back of benefits received by both parties. In this sense, the remedy is restitutionary in nature. The setting aside of the agreement will be accompanied by restitutionary relief for both parties. If the misrepresentation was made fraudulently, in the sense that either the misrepresentor knew that the statement was false or made the statement "recklessly and without care, whether it was true or false, and not with the belief that it was true,"¹the resulting agreement could be rescinded at common law. In equity, however, a decree of rescission could be granted even in a case where the misrepresentation was innocently false in the sense that the misrepresentor did not make the statement with fraudulent intent. The availability of rescission, however, is curtailed by the existence of a number of traditional limita-

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tions or defences and, where such limitations apply, the misrepresentee may wish to pursue other forms of relief.

As well as or as an alternative to rescissionary relief, the misrepresentee may in certain circumstances pursue claims for compensation in tort. Where an agreement has been induced by a fraudulent misstatement, the tort of deceit has been committed and the misrepresentee will be entitled to recover compensatory damages. Although tortious liability for fraudulent inducement of agreements has a lengthy history,²it was not until the latter part of the twentieth century that the tort of negligence was extended to cover economic loss sustained as a result of negligent misstatements.³This form of liability was, in due course, extended to embrace claims for injuries sustained as a result of entering into unattractive agreements induced by negligent misstatement.⁴The measure of relief in tort extends to compensation for all losses occasioned by the tortious misconduct and is thus more comprehensive than the restitutionary relief that accompanies rescission of the agreement.⁵

Before...