STEP 1: WAS THERE ERROR?
The error was in the identification of the parcel of land to be purchased – C and G actually were not talking about the same piece of land
STEP 2: WAS THE ERROR INDUCED BY MISREPRESENTATION?
Yes C had misrepresented the land to be sold by omitting details and writing ambiguous terms (e.g. “more or less”) into the contract when the offer was modified
STEP 3: BUT-FOR THAT ERROR...
G would not have purchased the land if the terms had been clear (i.e. if the misrepresentation had not occurred)
Judgment in Grynspan’s favour a result of the relative culpability of the parties – whereas G was “imprudent and inattentive”, C was deliberately misleading to the point of being fraudulent, so the judgment goes against him.
Tremblay v. Les Pétroles Inc
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Causality: “...but for that error”
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Lies, manoeuvres, concealment, silence
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What is simply an exaggeration/inflation (bon dol), what amounts to fraud?
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How much do we expect from the victim? Necessity to ask, inquire?
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Can subsequent behaviour confirm the contract despite the fraud?
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Continuing to “enjoy the benefits” of the contract?
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Damages: What is the proper measure of damages?
CVL – Tremblay v. Les Pétroles Inc., [1961] B.R. 856 (C.A.): CB2 80 |
Jurisdiction
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Quebec
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Facts
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T leased a garage from LPI, being led to believe that he could make a profit but was unable to see the books (instead, only some data from the last year’s operations). After half a year of operation (and having paid 2 months’ rent and bought uniforms/cards/etc), T realized that he could not possibly make a profit. T sues to annul the contract, cancel the hypothec guarantee, recover his deposit, and recover losses – all because of fraud.
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Issues
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Was there fraud? Did T ratify the K through his subsequent actions?
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Holding
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Yes. No. Tremblay.
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Reasoning
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Hyde J (3-2):
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TPI’s representatives’ statements were not just lawful exaggeration but baseless representations that induced T to K in error
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Baseless representations: the garage was operating at a loss for the past six or seven years!!!
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T would not have entered into lease if he’d known that the garage had operated at a loss for six or seven years there was fraud, and T can request resiliation of K
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Once T established fraud, burden was on LPI to show ratification
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Defrauding became apparent only by degrees T didn’t realize until half-a-year later that he could not make a profit, and it was natural for him to try to make a profit first – he did act on his realization of the misinformation as soon as he realized it
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Also – there were price wars between petrol companies that would have made it especially difficult to make a profit.
Dissent (Bissonnette J): Yes. Yes.
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Doctrinal distinction between wilful fraud and the vendor’s ability or buyer’s naïveté
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Fraud occurs when it induces consent where the truth would not have – which is the case here
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Fraud creates relative nullity, so acquiescence or ratification can render it moot
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T brought his case too late, and also acted on his obligations, despite knowing from the first weeks that he could not make a profit; he also prepared for a future by ordering uniforms and cards
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T’s actions suggest valid consent was given to the K
Dissent (Badeaux J): No. (And, even so, yes.)
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LPI’s representatives acted in a manner not suggestive of willful fraud
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T could have judged from the last year’s data that the dollar figures he thought he’d heard were wrong
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T was the victim of his own inexperience, negligence, commercial conditions rather than LPI’s actions, a price war, extravagance, and imprudence – LPI did not act so as to willfully mislead him
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Ratio
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Baseless representations (beyond lawful exaggeration but short of active lying) that induce another party to K in error (“but for”) can constitute fraud. It is natural for business managers in trouble to “try to make the business work”, which does not qualify as ratifying the K.
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Comments
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Would have been easy for Tremblay to have gotten the correct information and noticed the error
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Here and Esso v. Mardon (below): tension between acting as per the law, and the natural tendency to try to make things work “better” if they’re not going well (confirming the K?)
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Bissonnette J. comes dangerously close to recognizing lesion
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CCQ 1401 should only be pled carefully, showing why there was fraud
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Difficulties with Dol
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Hard to know the line between where the victim not being diligent enough, vs. the role of the other party in misleading
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There has been a shift in paradigm in consumer law in which the assumption is that people are not smart and that they don’t have a team of lawyers examining their contracts (due diligence)
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There is a time limit for these kind of claims, but one cannot be barred from bringing in a claim if they don’t know that fraud exists
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