Oral Warranty (Contract)

See Also

• Negligent Misrepresentation

Bertone v. Robins, 2009 CanLII 35728 (ON SC)

[25] It is further the plaintiff’s position that extrinsic evidence is not admissible to add to or vary the terms of the contract. The plaintiff relies upon the decision of Candev Financial Services Ltd. v. Klein (1994), 34 C.P.C. (3d) 122, in support of its position that extrinsic evidence is not admissible. However, in the British Columbia Court of Appeal decision in Gallen v. Allstate Grain Co. (1984), 1984 CanLII 752 (BC CA), 9 D.L.R. (4th) 496, the court summarized exceptions to the parole evidence rule which included evidence to show that a contract was invalid because of fraud or misrepresentation.

[26] Lambert J.A. outlined the jurisprudence with respect to collateral warrantees and with respect to misrepresentations inducing an agreement at page 511 of Gallen where he stated:

Bauer v. Bank of Montréal, (1982) 2 S.C.R. 102, explicitly recognizes a particular exception to the principle, where at p 430 D.L.R., p 111 S.C.R., Mr. Justice McIntyre for the Supreme Court of Canada said:

Various authorities were cited for the proposition that a contract induced by misrepresentation or by an oral representation, inconsistent with the form of a written contract, would not stand and could not bind the party to whom the representation had been made. …………. No quarrel can be made with the general provision advanced on this point by the appellant. To succeed, however, this argument must rest upon a finding of some misrepresentation by the bank, innocent or not, or on some oral representation inconsistent with the written document which caused a misimpression in the guarantor’s mind, or upon some omission on the part of the bank manager to explain the contents of the document which induced the guarantor to enter into the guarantee upon a misunderstanding as to its nature. So, if the contract is induced by an oral misrepresentation that is inconsistent with the written contract, the contract cannot stand.

Kieswetter Resource Recovery Group Inc. v. 1313192 Ontario Limited, 2009 ONCA 259 (CanLII)

[5] The central issue between the parties was whether the respondent company and its principals, Roger and Ken Kieswetter had given various oral warranties and agreements which induced the appellants to enter into the agreements pursuant to which they acquired this business.

[9] The respondents offered to provide assistance to the appellants as they started up and learned the business and did so. But they made no oral representations, warranties or promises to do so. Their only agreements are those reflected in the written documentation prepared in connection with the sale of the business and nowhere in those documents is there any mention of any agreements of the nature suggested by the appellants.

[10] The appellants argue that the language of the personal guarantee:

… in consideration of Kieswetter Resource Recovery Group Inc. (herein called the “Lender”) agreeing to deal with or to continue to deal with 1313192 Ontario Limited (herein called the “Borrower”) the undersigned hereby unconditionally guarantees …

is evidence of and references the oral representation and promises made by the respondents. We disagree. Clearly this language relates to the fact that the respondents agreed to contract with the numbered company, newly incorporated for this transaction, a company without a work history, experience and most importantly, assets and hence the need for a personal guarantee from Mr. Syrier.

[13] He concluded that the respondents did not make the oral undertakings or warranties alleged and accepted the evidence of the respondents over that of the appellants in this respect. In addition he noted that there was no reference made to any alleged oral undertakings or warranties by the appellants until two years after the contract had been signed when they stopped all payments to the respondents and received a demand letter from the respondent’s solicitors. Indeed even in the appellants’ solicitors response to that demand letter there was no mention made of breach of any oral warranties or undertakings.

[14] In our view the evidence overwhelmingly supported the trial judge’s conclusion and we would not interfere with his finding in this respect.

Gallen v. Butterley, 1984 CanLII 752 (BC CA)

[10] A statement in Anson's Law of Contracts, 25th ed., at p. 126 was adopted by the Supreme Court of Canada in Carman Const. Ltd. v. C.P.R., 1982 CanLII 52 (SCC), (1982) 1 S.C.R. 958, 18 B.L.R. 65, 136 D.L.R. (3d) 193, 42 N.R. 147. It shows that an oral warranty must be strictly proved and that the existence of an intention to contract on the part of all parties must be clearly shown. This test is set out [at p. 966]:

"The question therefore is: On the totality of evidence, must the person making the statement be taken to have warranted its accuracy, i.e. promised to make it good?"

The evidence in this case falls far short of the test propounded there.

[53] The third comment is that Hawrish, Bauer and Carman Const. illustrate, by the attention given to the evidence, that the principle is not an absolute one. In Hawrish, at p. 520, Judson J. said:

Bearing in mind these remarks to the effect that there must be a clear intention to create a binding agreement, I am not convinced that the evidence in this case indicates clearly the existence of such intention. Indeed, I am disposed to agree with what the Court of Appeal said on this point.

In Bauer, at p. 111, McIntyre J. said:

For reasons which will appear later in that part of this judgment dealing with the collateral contract argument, I am of the view that there is no evidence which would support any such finding against the bank.

In Carman Const, at p. 967, Martland J. said:

In my opinion, there is no evidence in the present case to establish an intention to warrant the accuracy of the statement made by the C.P.R. employee to Fielding, i.e. no promise to make it good.

If the principle were an absolute one, there would have been no need in those cases to mention the evidence because the statement alleged in each case, if established by the evidence, clearly contradicted the document. So the cases could have been disposed of by the application of the absolute principle, no matter how convincing the evidence, even if both parties agreed that the oral warranty was given, and was intended to be binding, and was intended to override or modify the document.

[54] The fourth point is that Bauer v. Bank of Montreal explicitly recognizes a particular exception to the principle, where, at p. 111, Mclntyre J., for the Supreme Court of Canada, said:

Various authorities were cited for the proposition that 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. These authorities included Can. Indemnity Co. v. Okanagan Mainline Real Estate Bd. (1970) CanLII 152 (SCC), (1971) S.C.R. 493, [1971] 1 W.W.R. 289, [1970] I.L.R. 1-383, 16 D.L.R. (3d) 715 (sub nom. Can. Indemnity Co. v. Okanagan Mainline Real Estate Bd.; Okanagan Mainline Real Estate Bd. v. Whillis, Harding Ins. Agencies Ltd.)], per Judson J. at p. 500, Jaques v. Lloyd D. George & Partners [[1968] 1 W.L.R. 625, [1968] 2 All E.R. 187], per Lord Denning at pp. 630-631, Firestone Tyre & Rubber Co. v. Vokins & Co., [[1951] 1 Lloyds Rep. 32 (K.B.D.)], see Devlin J. at p. 39, and Mendelssohn v. Normand Ltd. [[1970] 1 Q.B. 177, [1969] 3 W.L.R. 139, [1969] 2 All E.R. 1215 (C.A.)].

No quarrel can be made with the general proposition advanced on this point by the appellant. To succeed, however, this argument must rest upon a finding of some misrepresentation by the bank, innocent or not, or on some oral representation inconsistent with the written document which caused a misimpression in the guarantor's mind, or upon some omission on the part of the bank manager to explain the contents of the document which induced the guarantor to enter into the guarantee upon a misunderstanding as to its nature.

So, if the contract is induced by an oral misrepresentation that is inconsistent with the written contract, the written contract cannot stand.