Oral Warranty (Contract)

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.