Contracts (O'Byrne)
Chapter Seven: Representations and Terms (Classifications and Consequences)
I.
Definition of a misrepresentation per Fridman: "a misstatement of some fact
which is material to the making or inducement of a contract."
II.
General rule per Treitel: no relief for a misrepresentation unless it is a statement
of existing fact
A. mere puffs do not count as misrepresentations
B. statements of opinion or belief do not count as misrepresentations
*Rembrandt example
*but see Smith v. Land and House Property Corp (CB)
C. representations as to the future do not count as misrepresentations
*Edington v. Fitzmaurice (1885) 29 Ch.D. 459.
III.
Ingredients of an actionable misrepresentation per Treitel
The misrepresentation must be:
A. unambiguous
B. material
What is the test? Per Treitel: "it must be one which would affect the judgment
of a reasonable person in deciding whether or on what terms to enter into the
contract without making such inquiries as he would otherwise make."
C. relied on by the representee
**How is the reliance criterion different from the materiality criterion?
Redgrave v. Hurd (CB)
IV.
Meanings of "rescission"
*see CB
A. an action to set the contract aside due to some defect affecting the formation
of the contract (what is meant in this chapter)
2
B. voluntary setting aside of the contract by both parties
C. incorrectly, it refers to situation where one party is discharged from having to
carry out his or her obligations under the contract because the other party
has committed a serious breach
V.
Difference between a claim for damages and an action to rescind a contract
damages: plaintiff seeks money damages for the performance which should have
been rendered under the contract.
rescission: plaintiff seeks non-enforcement of the contract (parties are restored to
their pre-contractual position.)
VI.
Liability in tort: fraudulent misrepresentation
For the purposes of this class, rely on McCamus, citing Redgrave and related case
law, who states that a representation is fraudulent if either the misrepresentor
knew that the statement was false or made the statement “recklessly and
without care, whether it was true or false.”
VII.
Liability in tort: negligent misstatement
For the purposes of this class, rely on the following assessment by McCamus as to
when a negligent misrepresentation may occur in the pre-contractual arena:
As a general proposition, it appears to be sufficient to establish a
‘special relationship’ if the reliance of the representee on the
representor’s statement was both foreseeable by the representor
and reasonable on the part of the representee. Where the
misrepresentor does not possess any particular expertise or access to
superior skill and knowledge, reliance may well be unreasonable
and the special relationship will be held not to exist.
Note too that negligent misrepresentation if a recognized analogous
category of proximity under Coopers. The parties are proximate due to
the defendant's invitation to rely.
IX.
Duty to disclose?
Bank of B.C. v. Wren
X.
Bars to actions for rescission based on innocent and negligent misrepresentation
3
A. Laches
B. Affirmation of contract
C. Restitution is impossible, impractical or unjust.
*Kupchak v. Dayson Holdings Ltd.
D. Third party rights are prejudiced
E. Execution of the contract in the case of land?
F. Execution of the contract for the sale of goods??
*see the rule in Leaf International
Sale of Goods Act R.S.A. 2000, c. S-2:
s. 13(4) When...the buyer has accepted the goods or part of
them...the breach of any condition to be fulfilled by the
seller shall only be treated as a breach of warranty and not
as a ground for rejecting the goods...unless there is a term of
the contract expressed or implied to that effect.
s. 35 The buyer shall be deemed to have accepted the goods
...
(c)
when after the lapse of a reasonable time he retains
the goods without intimating to the seller that he has
rejected them.
XI.
Bars to actions for rescission based on fraudulent misrepresentation
(note: whether the contract is executed or not is irrelevant)
A.
B.
C.
D.
Laches
Affirmation of Contract
Restitution is impossible, impractical or unjust
Third party rights are prejudiced