Four Corners of The Contract

Tagged BY Kindness Inc (TBK Creative) v 2221265 Ontario Inc. (Thermo-bilt Window Industries Ltd.), 2018 CanLII 130092 (ON SCSM)

[49] First, it is clear to me that the law of negligence recognizes that a negligent misrepresentation includes omissions, particularly where one party had expertise and knowledge, and certainly a duty of care with respect to the other party. In Hashemi-Sabet v. Mazzulla (2016 ONCA 273), the trial court and Court of Appeal did not dispute that a failure to warn was a form of negligent misrepresentation, although the case was dismissed on other grounds. In Murphy v Hants Realty Ltd. (2017) NSSC 282, the court held that an omission to provide information is a form of negligent misrepresentation.

[50]

With respect to negligent misrepresentation, although I received no submissions from either party, on whether or not the parol evidence rule regarding the management services contract clause on p. 4, of tab 1 Exhibit 1 (not warranting financial results), barred a finding of negligent misrepresentation because of the operation of the parol evidence rule. This rule is defined in Creston Moly Corp. v. Sattva Capital Corp. (2014 SCC 53). There, Rothstein J defined the rule as precluding “admission of evidence outside the words of the written contract that would add to, subtract from, vary, or contradict a contract that has been wholly reduced to writing …”. At the same time, the parol evidence rule is not absolute: there are a number of exceptions that allow courts to look beyond the four corners of the contract. In Bauer v. Bank of Montreal, (1980 CanLII 12 (SCC), (1980) 2 SCR 102) the Supreme Court of Canada recognized that one exception was misrepresentation: “a contract induced by misrepresentation or by an oral representation, inconsistent with the form of the written contract, would not stand and could not bind the party to whom the representation had been made.”[1] However, the SCC stressed the evidentiary burden in such a case: “To succeed, however, this argument must rest upon a finding of some misrepresentation … innocent or not, or on some oral representation inconsistent with the written document which caused a misimpression in the guarantor's mind.” (Ibid. 111).

[51] I also note that the clause in the service agreements referred to above is not a “whole agreement” clause, which might well bar parol evidence. A “whole agreement” clause would note that the buyer acknowledges that the contracts contains all of the terms and provisions agreed to, and that it is not subject to any oral agreement or oral representation of any kind. In this case, the clause is limited to not warranting financial results of the services performed. It does not cover every provision of the agreement. Therefore “a whole agreement” clause upholding the use of the parol evidence rule does not apply in this case.

[52] As well, Lambert JA’s ruling in Gallen v Nunweile (1981 (9 D.L.R. ) 4th (BCCA)) is useful in a case like this one. The case concerned farmers who bought buckwheat seeds upon being assured that the buckwheat would outgrow and smother weeds. This turned out not to be the case: weeds choked the field, and the crop was ruined. They sued the vendor for breach of an oral warranty, despite the fact that the contract of sale had a clause that explicitly precluded any warranties on the part of the vendor. The farmers won at trial and then on appeal; leave to appeal to the Supreme Court was not granted.