Misrepresentation
| Author | John D. Mccamus |
| Profession | Professor of Law. Osgoode Hall Law School, York University |
| Pages | 325-363 |
CHAP TER 10
MISR EPRESENTATION
A. INTRODUCTION
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 rem-
edies may be avail able to the misrepresentee, both at common law and
in equity. The principal remedy is that of res cission, 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 re-
stored to their initial position in the sense that there must be possible
a giving back and a taking back of benefi ts received by both parties.
In this sense, the remedy is restitutionary in nature. The setting aside
of the agreement will be accompanied by restitutionar y relief for both
parties. If the misrepresentation wa s made fraudulently, in the sense
that either the misrepresentor knew that the statement was fal se or
made the statement “recklessly and w ithout care, whether it was true
or false, and not with the belief that it was tr ue,”1 the resulting ag ree-
ment could be rescinded at common law. In equity, however, a decree of
rescission could be gra nted even in a case where the misrepresentation
was innocently false in the sense th at the misrepresentor did not make
the statement with fraudulent intent. The availabil ity of rescission,
however, is curtailed by the ex istence of a number of tradit ional limit a-
1Redgrave v. Hurd (1881), 20 Ch. D. 1 at 13 (C.A.), Jessel M.R.
325
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tions or defences and, where such limitations apply, the misreprese ntee
may wish to pursue other form s of relief.
As well as or as an alternative to rescissionary relief, the misrepre-
sentee may in certain circumstances pursue claim s for compensation in
tort. Where an agreement has been induced by a fr audulent misstate-
ment, 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,2 it was
not until the latter part of the twentieth century that the tort of negli-
gence was extended to cover economic loss sustained a s a result of negli-
gent mis state ments.3 This form of liability was, in due course, extended
to embrace claims for injurie s sustained as a re sult 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 that accompanies rescis sion of the agreement.5
Before considering the var ious remedial alternatives avail able in the
context of misrepresentation, we tur n to an account of the elements of
operative misrepresent ation and a consideration of the extent to which
non-disclosure of a fact may const itute misrepresentat ion in the requi-
site sense. We will also consider the suggestion made by some that a
duty to disclose facts might be imposed where a standard of good-faith
conduct so requires.
B. THE ELEMENTS OF MISREPRESENTATION
In order to provide a basis for rescissionary rel ief, the misrepresent a-
tion must be a statement of present or past fact that is false. For these
purposes, statements of fact are distinguished from mere “sales talk,”
from statements of opinion or belief, from statements of intention or
promises and, under trad itional doctrine at lea st, 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 mi sstatement
must serve as an inducement to the mak ing of that decision.
2 See, for example, De rry v. Peek (1889), 14 A.C. 337 (H.L.).
3Hedley Byrne & Co. v. Heller & Partne rs Ltd., [1964] A.C. 465, [1963] 2 All E.R.
575 (H.L.).
4Esso Petroleum Co. v. Mardon, [1976] Q.B. 801 (C.A.); Sodd Corp. v. Tessis (1977),
17 O.R. (2d) 158, 79 D.L.R. (3d) 632 (C.A.).
5 For discuss ion of the difference between t he restitutionary a nd tort measures of
relief, see Chapt er 1, section C.
Misrepresentation 327
1) S a les Talk
Vague and imprecise expressions or statements puffi ng or aggrandiz-
ing the virt ues of, for example, a seller’s product are not relied upon
by a reasonable purcha ser. Such statements are mere sales talk, “puff-
ery” or “dealer’s talk” and not statements of fact th at, 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 and improvable at moderate cost”8 or an exaggerated estimate
of the value of a crop produced by the land to be sold9have all been
held to be mere sales talk that affords no ground for relief. In some
cases, however, vague commendatory lang uage from a seller who has
privileged inform ation concerning t he 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 a s
an implicit statement of fact that the vehicle met a minimum standard
of roadworthiness.10 Similarly, 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 constr uction was held to have made a misrepresentation
when describing the house as “ well built.”11
2) O pini on
The distinction between statements of fact and statements of opinion
is similarly intended to exclude, as a basis for relief, statements upon
which the misrepresentee would not reasonably rely. Thus, where an
opinion is offered by someone who has no particular expert ise in the
matter in question, the statement would be considered to be one of
opinion rather than one of fact. A reason able person would not rely on
such an opinion. Thus, an estimate by a vendor of land who estimated
the sheep-bearing capacity of the land was held to have been a mere
opinion on the matter.12 Similarly, estimates of the value of assets by
6 Andronyk 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.
7 Scott v. Hanson (1829), 1 Russ. & M. 128, 39 E.R . 49.
8 Dimmock v. Hallett (1866), L.R. 2 Ch. App. 21.
9 Rasch v. Horne, [1930] 3 D.L.R. 647 (Man. C.A.).
11 Mariani v. Lemstra, [2003] O.J. No. 750.
Girard (1983), 149 D.L.R. (3d) 359 (B.C.S.C.) (private se ller of boat represented
to be sound).
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