Misrepresentation In Contract Law

Misrepresentation occurs when one party makes a false statement of fact that induces the other party to enter into a contract. It doesn’t always involve outright lying — in some cases, even a technically true but misleading statement can qualify.

For a misrepresentation claim to succeed, three things generally need to be established:

• A false statement of fact was made — not merely an opinion or a vague promise.
• The statement was made before or at the time the contract was entered into.
• The innocent party relied on that statement in deciding to sign the contract.

If all three are present, the law may entitle you to have the contract unwound, to claim damages, or both — depending on the type of misrepresentation involved.

Not all misrepresentations are treated the same way. Ontario courts recognize three distinct categories, each with different consequences.

This is the most serious type. Fraudulent misrepresentation occurs when a party makes a false statement knowingly, without belief in its truth, or with reckless disregard for whether it is true or false.

In plain terms: they lied to you, and they knew, or ought to have known, that they were lying.

What remedies are available?

• You can rescind (cancel) the contract.
• You can claim damages — and because fraud is involved, the courts take a broader view of what losses are recoverable.
• In some cases, punitive damages may be available to punish the wrongdoer.

Fraudulent misrepresentation is the hardest to prove because it often requires establishing the other party’s state of mind or intention. But when proven, it carries the most serious consequences. 

Negligent misrepresentation occurs when a false statement is made carelessly, that is, without taking reasonable care to ensure the statement was accurate.

This is far more common in practice than fraudulent misrepresentation. The person didn’t lie on purpose, but they made a representation they had no proper basis to make.

What remedies are available?

• Rescission of the contract.
• Damages to compensate for the loss caused by relying on the false statement.

To succeed on a negligent misrepresentation claim, you generally need to show that the other party had a duty to take care in making the statement — which is often present in commercial dealings, professional relationships, and situations where one party has special knowledge or expertise that the other is relying on.

Innocent misrepresentation occurs when a false statement is made honestly and without negligence — the person genuinely believed what they said was true and had reasonable grounds for that belief.

This is the least serious category, and the remedies are more limited as a result.

What remedies are available?

• Rescission may be available, but courts have discretion to refuse it — particularly if rescission would be impractical or unfair in the circumstances.
• Damages are generally not available for innocent misrepresentation on their own, though the court may award an indemnity in some cases.

We have experience handling complex civil litigation matters, including misrepresentation claims arising from contracts of all kinds. If you believe you were misled into signing an agreement, we can help you understand your rights and options.

Contact us at 416.901.9984 or info@pintoshekib.ca for a confidential consultation.