Issue: Did X, through misrepresentation, induce Y into entering into the contract?
WHAT IS THE MISREPRESENTATION:
_________________________________________________________________________________________________
_________________________________________________________________________________________________
Rule/Application
Misrepresentation occurs in situations where one party makes a statement of fact to
another party that is false and that statement induces the other party to enter into
the contract.
It is important to note that we are not dealing with a breach of contract here but
rather we are talking about misrepresentations that exist outside of the contract.
The appropriate remedy is rescission in which the contract is unwound. The
purpose of recession is to put the parties in their pre-contract position While on the
contrary, the awarding of expectation damages (the most common remedial award)
looks to put the parties in the position they would have been in had the contract
been performed. Because the remedies differ in such a way, the distinction between
mere representations and terms is vital.
Additionally, the courts have established that there can be concurrent action against
one party in both contract and tort (negligent misrepresentation) (BC GHecho) as
such, X may wish to strategically decide to pursue the various forms of actions
available to him/her depending on the facts of his/her case, the remedy they wish to
pursue (rescission v expectation damages) and the existences of the various
defenses that may bar him/her from that particular remedy.
The court in Redgrave v Hurd established that in order to be able to make out a case
for misrepresentation the following steps have to be proven
(1) There must be a statement of fact:
a. While on the face of it the representation may seem like a
statement of opinion, opinions can be perceived as facts. The court
in Smith v Hughes stated that if a party has a monopoly over the
information which they are conveying to the other party, it will be
deemed to be a statement of fact. The rationale behind this is that
if the party that is allegedly being misrepresented has absolutely
no knowledge on the information being conveyed it is reasonable
to assume that they would consider the information to be fact
rather than an opinion. In this case: (MOST DESIREABLE
TENANT)
b. Opinions are not actionable but facts are.
c. Predictions are not facts!! That cant be a fact it has a predictive
value but a fact can be true or false.
(2) Is the statement false?
a. BUT in smith v landing “most desirable” tenant is kind of just as
vauge and seen as misrepresentaitons. There does not seem to be
any material different between most desirable and top shape
(3) That statement induced the other party in to signing the contract.
a. Regradve v Hurd provided some elucidation on this step and
stated that there is a presumption working in favor of the victim
that there is an inducement. However, this presumption is only
raised if it can be proven that the statements made were material
to the victim. What is material is fact specific, but it generally
means that the statement was of importance to the victim. In
Redgrave, it was determined that the profitability of the
partnership business was material to the victim. In this case:
b. It is also important to note that this is simply a presumption which
can be rebutted if the evidence demonstrates that the victim either
expressly stated that they did not care, or they knew that the
statements were false. In this case:
It is also important to note that in Redgrave v Hurd the court struck out the defence
of the other party having to make an inquiry into the accuracy of the
representations given.
Since the above has been made out, the case for innocent misrepresentation has
been established. The last important step is to consider whether the representations
made were fraudulent or not. The characterization of the misrepresentation is vital
to the type of remedy that can be sought (will be explained in greater detail below
with discussion of bars). In order to make a case for fraudulent misrepresentation
the party must be able to prove that the representor did NOT believe in the truth of
his/her comments (Derry v Peek). However, it is important to note that this is a very
heavy burden and the courts are reluctant in calling individuals liars, therefore the
facts must strongly indicate the elements of fraudulent statements. In this case:
BARS:
Rescssion may be barred if any of the following is present (all of which are from
Kuphachak v Dayson Holding)
Affirmation – This occurs when the victim discovers the misrepresentation, and
decided to carry on with the contract nonetheless. Affirmation may be express or
implied. However for implied affirmation we will need clear and unambiguous
conduct that shows affirming the contract. If you learn about the defect and do not
do anything that is evidence of an implied affirmation. If this exists you will get
nothing regardless of whether the misrepresentation was fraudulent or innocent. In
this case:
Laches occurs when the victim has delayed protest for long enough so that the
misrepresentor has now relied on that delay and thus changed their position in such
a way that it would be inequitable to rescind the contract. If this bar exists and there
is a fraudulent misrepresentation, the victim will be able to recover via monetary
damages. In this case:
 Remember in Kupacheck they said timing matters, if you change your
position after you find out then it won’t count.
Restitutio Integrium: The only way in which rescission can work conceptually is if
we can restore the parties to their pre contract position. When the consideration has
changed in such a way that it would be impossible to return the consideration in its
full integrity, the bar of restitution integrium applies and therefore the contract will
not be rescinde. If this occurs and the misrep is fraudulent, the victim may be able to
recover monetary damages. In this case:
Example Kupachak: The building was torn down, half interest was given to someone
else and a new building was put up.