Misrepresentation
| Author | John D. McCamus |
| Pages | 359-402 |
359
CH AP TER 10
MISR EPRESENTATION
A. INTRODUCTION
When one party has induced another party to enter into an agreement
by making a mater ial statement of fact that is false, a variety of reme-
dies may be available 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 unwind ing or setting aside the agreement. The remedy
of rescission is avail able only if the parties to the agreement can be
restored to their initia l position in the sense th at there must be possi-
ble a giving back and a tak ing back of benefits received by both parties.
In this sense, the remedy is restitutionar y 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 misrepre sentor knew that the statement was false or
made the statement “recklessly and w ithout care, whether it was true
or false, and not with the bel ief that 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ment could be rescinded at common law.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 misrepresent a-
tion was innocently false in the sense that the misrepresentor did not
make the statement with fraudulent intent. The availability of rescis-
sion, however, is curtailed by the existence of a number of tr aditional
1 Redg rave v Hurd (1881), 20 Ch D 1 at 13 (CA) [Redgrav e v Hurd], Jessel MR.
THE LAW OF CONTR ACTS360
limitations or defences and, where such limitations apply, the misrep-
resentee may wish to pursue other forms of relief.
As well as or as an alternative to rescissionar y relief, the misrepre-
sentee may in certai n circumstances 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 t he misrepresentee
will be entitled to recover compens atory damages. Although tortious
liability for fraudulent inducement of agreements has a lengt hy history,2
it was not until the latter part of t he twentieth century th at the tort of
negligence was extended to cover economic loss sustained a s a result
of negligent misstatements.3 This form of liability was, in due course,
extended to embrace claims for injuries sustained as a result of enter-
ing into unattractive agreements induced by negligent misstatement.4
The measure of relief in tort extends to compen sation for all losses
occasioned by the tortious misconduct and is thus more comprehen-
sive than the restitutionary relief that accompanies rescission of the
agreement.5
Before considering the various remed ial alternatives avai lable in
the context of misrepresentation, we tur n to an account of the ele-
ments of operative misrepresentat ion and a consideration of the extent
to which non-disclosure of a fact may constitute misrepresentation in
the requisite sense. We will a lso consider the suggestion made by some
that a duty to disclose fact s might be imposed where a standard of
good-faith conduct so requires.
B. THE ELEMENTS OF MISREPRESENTATION
In order to provide a basis for rescissiona ry relief, the misrepresent a-
tion must be a statement of present or past fact that is fa lse. 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 traditional doctrine at least, from statements of
law. Further, the fact that is misstated must be m aterial to the decision
2 See, for example, Der ry v Peek (1889), 14 AC 337 (HL) [Derry].
(HL) [Hedle y Byrne].
4 Esso Petroleum Co v Mardon, [1976] QB 801 (CA) [Mardon]; Sodd Corp oration v
Tes si s (1977), 17 OR (2d) 158, 79 DLR (3d) 632 (CA) [Sodd v Tessis].
5 For discussion of the d ifference between the rest itutionary and tort me asures of
relief, see Chapt er 1, Section C.
Misrepres entation 361
of the misrepresentee to enter the agreement and the misstatement
must serve as an inducement to the making of that decision.
1) Sales Talk
Vague and imprecise expressions or statement s puffing or aggrandizing
the virtues of, for example, a seller’s product are not relied upon by a
reasonable purchaser. Such statements are mere sales talk, “puffery” or
“dealer’s talk” and not statements of fact that, if fa lse, provide a founda-
tion for legal remedies. Thus, statements by a seller of land th at 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 sold9 have all been held to
be mere sales talk t hat affords no ground for relief. In some cases, how-
ever, vague commendatory language from a seller who has pr ivileged
information concerning 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 standard of road-
worthiness.10 Similarly, the seller of a house who had acted as his own
contractor in building the home and who was aware of ser ious defects
in the construction was held to h ave made a misrepresentation when
describing the house as “well built.”11
2) O pin io n
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 expertise i n 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 capacity of the land was held to have been a mere
6 Andronyk v Williams (1985), 21 DLR (4th) 557 (Man CA), leave to appeal to SCC
refused (1986), 42 Man R (2d) 242n (SCC).
9 Rasch v Horne, [1930] 3 DLR 647 (Man CA) [Rasch v Horne].
10 Andrews v Hopkinson, [1957] 1 QB 229.
11 Mariani v Le mstra, [2003] OJ No 750 (SCJ).
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