Misrepresentation

• Author: John D. McCamus
• Pages: 335-377

335

CHAP TER 10

MISR EPRESENTATION

A. I NTRODUC TION

When one party has induced another par ty to enter into an agreement

by making a material statement of fact that is false, a variety of rem-

edies may be avail able to the misrepresentee, both at common law and

in equity. The principal remedy is that of resci ssion, which, if available,

has the effect of unwindi ng or setting a side the agreement. The remedy

of rescission is avail able only if the parties to the ag reement can be re-

stored to their initial position in the sense that t here must be possible

a giving back and a ta king back of benef‌its received by both part ies.

In this sens e, the remedy is restitutiona ry in nature. The setti ng aside

of the agreement will be accompanied by re stitutionary relief for both

parties. If the misrepresentation was made fraudulently, in the sense

that either the misrepresentor knew t hat the statement was false or

made the statement “recklessly and without care, whether it was true

or false, and not with the belief t hat it was true,”1 the resulting agree-

ment could be rescinded at common law.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 fals e in the sense that the misrepresentor did not make

the statement with fraudulent intent. The availability of re scission,

however, is curtailed by the existence of a number of traditional limita-

1Redg rave v. Hurd (1881), 20 Ch. D. 1 at 13 (C.A.), Jessel M.R.

THE LAW OF CONTR ACTS336

tions or defences and, where such limitations apply, the misrepresentee

may wish to pursue other forms of relief.

As well as or as an altern ative to rescissionar y relief, the misrepre-

sentee may in certai n circumstance s pursue claims for compensation in

tort. Where an agreement has been induced by a fraudulent misstate-

ment, the tort of deceit has been committed and the misrepresentee will

be entitled to recover compensatory dam ages. Although tortious liability

for fraudulent inducement of agreements has a lengthy history,2 it was

not until the latter part of the twentieth cent ury that the tort of negli-

gence was extended to cover economic loss sustained a s a result of negli-

gent misst atements.3 This form of liability was, in due course, extended

to embrace claims for injuries su stained as a result of entering into un-

attractive agreements induced by negligent misstatement.4 The mea sure

of relief in tort extends to compensation for all losses occasioned by the

tortious misconduct and is thus more comprehensive than the restitu-

tionary relief th at accompanies rescission of the agreement.5

Before considering the various remedial alternatives available in

the context of misrepresentation, we turn to an account of the ele-

ments of operative misrepresent ation and a consideration of the extent

to which non-disclosure of a fact may constitute misrepresentation in

the requisite sense. We will also consider the suggestion made by some

that a duty to disclose facts might be imposed where a sta ndard of

good-faith conduct so requires.

B. THE ELEMEN TS OF MISR EPR ESENT ATION

In order to provide a basis for rescissionar y relief, the misrepresenta-

tion must be a statement of present or past fact that is false. For these

purposes, st atements of fact are disting uished from mere “sales tal k,”

from statements of opin ion or belief, from stateme nts of intention or

promises and, under traditional doctrine at least, from statements of

law. Further, the fact that is misstated must be material to the deci-

sion of the misrepresentee to enter the agreement and the mis statement

must serve as an inducement to the mak ing of that decision.

2 See, for example, Der ry v. Peek (1889), 14 A.C. 337 (H.L.).

3Hedley Byrne & Co. v. Heller & Partners Lt d., [1964] A.C. 465, [1963] 2 All E .R.

575 (H.L.) [Hedley Byrne].

4Esso Petroleum Co. v. Mardon, [1976] Q.B. 801 (C.A.) [Esso v. Mardon]; Sodd Cor por-

ation v. Tessis (1977), 17 O.R. (2d) 158, 79 D.L.R. (3d) 632 (C.A.) [Sodd v. Tessis].

5 For discussion of t he difference between the re stitutionary and tort me asures of

relief, see Chapte r 1, Section C.

Misrepres entation 337

1) S a les Ta lk

Vague and imprecise expressions or statements puff‌ing or aggrandiz-

ing the virtues of, for example, a seller’s product are not relied upon

by a reasonable purchaser. Such statements are mere sales talk, “puff-

ery” or “dealer’s talk” and not statements of fact that, if false, provide a

foundation for legal remedies. Thus, statements by a seller of land that

the land is “improved”6 or is an “uncommonly rich” water meadow7 or

“fertile a nd improvable at moderate cost”8 or an exaggerated estimate

of the value of a crop produced by the land to be sold9 have all been

held to be mere sales talk that affords no ground for relief. In some

cases, however, vague commendatory language from a seller who has

privileged informat ion concerni ng the subject matter of the sale may be

taken to include an implicit statement of fact. Thus, the statement by a

seller of a used car that it was a “good little bus” was characterized as

an implicit statement of fact that the vehicle met a minimum st andard

of roadworthiness.10 Sim ilarly, the seller of a house who had acted as

his own contractor in building the home and who was aware of serious

defects in the construction was held to have made a misrepresentation

when describing the house a s “well built.”11

2) O pin i on

The distinction between statements of fact and statements of opinion

is similarly intended to exclude, as a basi s for relief, statements upon

which the misrepresentee would not reasonably rely. Thus, where an

opinion is offered by someone who has no particul ar experti se in the

matter in question, the statement would be considered to be one of

opinion rather than one of fact. A reasonable person would not rely on

such an opinion. Thus, an estimate by a vendor of land who estimated

the sheep-bearing c apacity of the land was held to have been a mere

opinion on the matter.12 Similarly, estimates of the value of assets by

6Andronyk v. Williams (1985), 21 D.L.R. (4th) 557 (Man. C.A.), leave to appeal to

S.C.C. refused (1986), 42 Man. R. (2d) 242n.

7Scott v. Hanson (1829), 1 Russ. & M. 128, 39 E.R. 49.

8Dimmock v. Hallett (1866), L.R. 2 Ch. App. 21.

9Rasch v. Horne, [1930] 3 D.L.R. 647 (Man. C.A.).

10 Andrews v. Hopkinson, [1957] 1 Q.B. 229.

11 Mariani v. Lemstra, [2003] O.J. No. 750.

12 Bisset v. Wilkinson, [1927] A.C. 177 (P.C.). And see, for example, Trethewey v.

Girard (1983), 149 D.L.R. (3d) 359 (B.C.S.C.) (private sel ler of boat represented

to be sound).