Fraud/Dol , Error (CVL)/Misrepresentation/Mistake (CML)
Error/Mistake (Dol/Misrepresentation) affects the intellectual formation of the decision (how “enlightened” it is)
What is at stake?
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Protection of “true consent” – will theory
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Stability of Contract (see e.g. Art. 1400 CCQ)
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Reliance!
But also: account for wrongdoing fraud or deception should be sanctioned!
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Reflected by Choice of Remedies:
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Recission/Restitution in case of Error/Mistake
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Dol/Fraudulous Misrepresentation: Damages (or Reduction, Art. 1407 CCQ)
FRAUDULENT ACTS – A summary of Dol and Misrepresentation
Fraudulent acts in forming a contract in CVL and CML are covered by the doctrines of Dol and Misrepresentation.
In CVL, finding dol gives rise to the relative nullity of the contract (1401 CcQ).
Three questions must be satisfied:
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existence of error?
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error induced by fraud?; and,
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but-for the error, would the parties have contracted? (Creighton v. Grynspan).
If dol is found, but the aggrevied party has ratified or acquiesced the contract, then the opportunity to annul the contract is lost (Tremblay v Les Petroles).
In CML, misrepresentation exists where the material statement of fact is false.
Three steps must be satisfied:
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statement of present/past false fact
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materiality to agreement in question based on reasonable person test; and,
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that the false fact induced the agreement (Sarvis v Vermont State Colleges).
The Doctrine of Hedley Byrne instructs that negligent misrepresentation can lead to tortious liability. In Esso v Mardon, it was found where one party has special knowledge or skills and induces another to contract in reliance on the information, the former may liable for contractual and delictual damages, based on a duty of care. In Mason v Bank of Nova Scotia, D, a third party to the contract, was found delictually liable for inducing P into a contract with another based on false financial information.
Fraud/Dol (CVL)
1398 CCQ
Consent may be given only by a person who, at the time of manifesting such consent, either expressly or tacitly, is capable of binding himself.
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1399 CCQ
Consent may be given only in a free and enlightened manner.
It may be vitiated by error, fear or lesion.
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1400 CCQ
Error vitiates consent of the parties or of one of them where it relates to the nature of the contract, the object of the prestation or anything that was essential in determining that consent.
An inexcusable error does not constitute a defect of consent.
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1401 CCQ
Error on the part of one party induced by fraud committed by the other party or with his knowledge vitiates consent whenever, but for that error, the party would not have contracted, or would have contracted on different terms.
Fraud may result from silence or concealment.
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1407 CCQ
A person whose consent is vitiated has the right to apply for annulment of the contract; in the case of error occasioned by fraud, of fear or of lesion, he may, in addition to annulment, also claim damages or, where he prefers that the contract be maintained, apply for a reduction of his obligation equivalent to the damages he would be justified in claiming.
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Causality: “but for that error” I would not have entered the contract, error was induced by the other party’s lies, maneuvers, concealment, silence – behaviour.
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If someone misleads a party to enter into a contract with a 3rd party, it is not dol unless the 3rd party was aware of the error (Rawleigh v. Dumoulin)
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Exaggeration/inflation (bon dol) vs. fraud; the law does not protect parties from their own imprudence, recognizes exaggeration inherent to contracts
(Related to the CML fraudulent misrepresentation)
Three-Step Analysis:
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Was there an error?
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Was it induced by fraud?
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But-for that error, would parties have contracted?
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If fraud creates relative nullity, was the K acquiesced or ratified by aggrieved party? (Tremblay v Les Petroles)
CVL – Creighton v. Grynspan, [1987] R.J.Q. 527 (C.A.): CB2 76 |
Jurisdiction
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G and partner offer to purchase C’s property, mentioning a survey plan with a square footage “more or less”, and including a strip of land belonging to the City; negotiations follow and a K is signed. G discovers that definition of plot does not conform to description, refuses to execute deed of purchase and sues C for annulment of offer and damages, as C wilfully misrepresented the true state of affairs.
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Facts
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Did C commit fraud by wilfully misleading G?
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Issues
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Yes Grynspan.
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Holding
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No Holt.
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Reasoning
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McCarthy J:
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C ought to have drawn G’s attention to true state of affairs – not enough to omit specific inclusion of strip of land and insert “more or less”
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G could have checked, but can’t be blamed for starting preparations for development
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G would not have offered to purchase if he had known the true state of affairs (but-for) therefore, contract is null
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Law of fraud shouldn’t be used to protect people from all imprudence
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G was led to believe that C had acquired the strip of land, and always made it clear that he wanted that strip
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Expiration clause also invalid because of fraud G can still bring the suit
Concurrence (LeBel)
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Silence and willful misleading, even though C knew the importance of this strip of land to G
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G had experience with land purchase, and should have known better (he and partner were “imprudents et inattentifs”)
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“Le droit civil traditionnel, après tout, ne protège pas les imprudents contre eux-mêmes. Il se préoccupe surtout de la protection du contractant normalement diligent ou prudent.”
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CA and SCC have recognised that commercial transactions often involve exaggeration or excessive representations
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One hesitates to conclude that a contracting party should have to inform the other party of its errors in all circumstances – but here there was fraud
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Ratio
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If party A’s knowingly false representation is the “but for” condition for party B to K, A has committed fraud. Fraud can apply to all pre-K’ual conduct. Possible to have ECO liability for fraud because there isn’t yet a K.
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