The seller of a small convenience store tells a buyer in passing that the business clears about $8,000 a month. The buyer asks for no proof, signs the agreement and takes over the lease. Within a few months the true figure turns out to be closer to half that. The seller had not lied on purpose. They had simply looked at gross sales, forgotten about several expenses, and spoken with more confidence than the numbers deserved.
This example is hypothetical, but situations like it are common, and they raise a legal question that often surprises people. Can you sue over a statement that was honest but careless? In Ontario, the answer is sometimes yes. The claim is called negligent misrepresentation. It sits between a simple broken promise and outright fraud, and it comes with some real limits.
This post explains what you would have to prove and where these claims tend to succeed or fail. It offers general information only and is not legal advice about any particular statement, contract or loss.
The easiest way to understand this claim is to compare it with its neighbours.
Fraud requires a dishonest state of mind. The person knew the statement was false or was reckless about whether it was true. Negligent misrepresentation does not require dishonesty. It asks whether the person failed to take reasonable care. That is often easier to prove, and it carries less stigma, which is one reason it is commonly pleaded as an alternative.
Breach of contract concerns promises the parties agreed to as terms of their deal. A negligent misrepresentation claim usually concerns a statement of fact made before, or sometimes outside, the contract, which influenced the decision to enter it. Sometimes both claims can be advanced together. The contract may also change the analysis, as discussed below.
The Five Things You Have to Prove
The Supreme Court of Canada set out the elements in Queen v. Cognos Inc., [1993] 1 SCR 87. A plaintiff must prove:
- There was a duty of care based on a “special relationship” between the person making the statement and the person hearing it.
- The statement was untrue, inaccurate or misleading.
- The person making it acted negligently in making it.
- The plaintiff relied on the statement, and that reliance was reasonable.
- The reliance caused the plaintiff harm.
Each of these can be contested. A claim must meet all five on a balance of probabilities.
When Is There a Duty of Care?
Nobody owes a duty of care to the whole world for everything they say. A remark at a family dinner about a stock tip is not likely to create legal responsibility. The law looks for a relationship in which it is reasonable for one person to depend on the other’s care with the information.
Deloitte & Touche v. Livent Inc. (Receiver of), 2017 SCC 63 is a case about auditors, but it matters more broadly. The Supreme Court focused on the purpose for which the defendant undertook to provide a service or information. Generally, a defendant’s duty is limited to the purpose for which they took on that task. Using the information for something else may fall outside that duty.
Think of it like this. A home appraisal prepared for a mortgage lender was prepared for that lender’s purposes. If a stranger picks up a copy and relies on it for an investment, it may be much harder to show the appraiser owed that stranger a duty. Factors that often matter include:
- Whether the person has particular knowledge or skills, or is holding themselves out as having them.
- Whether they knew who would rely on the information and why.
- Whether the statement was given in a business setting, as opposed to a social one.
- Whether they were paid or otherwise stood to benefit.
- Whether they were asked a direct question.
Negotiating parties can also owe each other a duty of care in what they represent. Cognos itself involved an employer telling a job candidate about a project without saying that its funding and approval were uncertain. A statement made during contract talks is thus not immune merely because the two sides have competing interests.
What Counts as a Misleading Statement
Generally, the statement must be one of fact. An honest opinion or a sales flourish such as “this location is fantastic” is hard to sue on. “This property has never flooded,” or “the franchise has an average annual revenue of $600,000” is a much better candidate. Statements about the future are harder again, but they may imply present facts. Saying “we will have your permit approved by March” may imply that an application is already on file.
A half-truth can be misleading as well. The statement may be technically accurate and still leave a false impression because of what was left out. Silence on its own, though, is a more difficult basis. There is no general duty to volunteer every helpful fact to the other side of a contract. It usually takes something more, such as a positive statement that the silence distorts, or a specific duty to disclose. A special case of this is hidden defects in a home, which carry their own body of law.
Common Situations in Brampton
These claims come up across everyday and commercial life here. Some settings where the issue tends to arise:
- Buying a business. Overstated revenue, customer contracts or equipment condition, including for owner-operated shops along the Queen Street corridor or small logistics companies.
- Commercial leases. A landlord’s statements about parking, permitted uses, signage, or a neighbouring tenant that will bring foot traffic.
- Real estate. An agent’s statement about square footage, legal basement status or zoning. In Krawchuk v. Scherbak, 2011 ONCA 352, the Court of Appeal dealt with representations about a home’s condition and the role of the seller’s agent.
- Professional advice. A financial adviser, accountant, mortgage broker or insurance agent giving inaccurate information within the scope of their work.
- Employment offers. Statements to a recruit about job security or the nature of a role that induce them to leave another position.
- Construction and trades. A subcontractor’s assurance that a product meets a code requirement, or a supplier’s claim about what a material can do.
Note that an employee, agent or professional can sometimes be personally liable for their own statement, even if a company is on the other side of the contract. On the other hand, a professional’s own governing regulator and insurer may be part of the picture.
Reasonable Reliance and Your Own Due Diligence
Defendants frequently attack the fourth element. They argue that you did not really rely on the statement, or that it was not reasonable to do so.
Reliance needs some link to your decision. If you had already signed before the statement was made, or you would have gone ahead regardless, this element becomes hard to prove. Your emails and messages from the time can be strong evidence, one way or the other. A note to your accountant saying that the revenue figure was the reason for the offer is helpful. A note saying “I don’t believe them, but I love the location” is not.
What about your failure to check? The answer is more nuanced than people expect. Failing to investigate does not automatically defeat a claim, and a person is not always required to assume they are being misled. But if the true facts were easily available, if you were invited to review the books and declined, or if a lawyer or inspector flagged the problem and you ignored it, a court might find reliance unreasonable. Even if liability is established, your own carelessness can reduce recovery. The Negligence Act allows fault to be apportioned between parties, and courts have applied the concept of contributory negligence in cases of this kind.
What the Contract Says Can Matter
Many written deals contain an “entire agreement” clause stating that the document is the whole bargain and that no outside representations are being relied upon. Some go further with express disclaimers. These can be a serious obstacle, but they do not automatically defeat every claim.
Ontario courts look at the wording of the clause, the relationship between the parties, whether the subject of the statement is addressed in the contract, and whether the statement was made before or after signing. The Court of Appeal has upheld findings in both directions. A clause that a commercial party negotiated with a lawyer’s help and that squarely covers the subject may carry a lot of weight. A boilerplate clause buried in a consumer’s paperwork may carry less. Fraud is a different matter altogether, and a clause of this kind generally will not shelter someone who lied.
Other relevant terms include limitation of liability clauses, survival periods for vendor representations in a business sale, and clauses requiring claims within a set number of months. Contract documents are often the first thing a lawyer will ask to see.
How Losses Are Measured
Damages in tort generally aim to put you back in the position you would have been in had the misleading statement never been made. This differs from contract damages, which typically aim to give you the benefit of the bargain you were promised.
The difference can be significant. In our opening example, a contract claim might ask for what the business would have been worth if it truly earned $8,000 a month. A negligent misrepresentation claim would generally ask what the buyer lost by entering the deal at all: the price paid over the true value, costs incurred, and other losses caused by the reliance. You must also show that your losses were caused by the statement and were not due to a separate market downturn or a business decision. You have a duty to take reasonable steps to limit your losses.
Good records matter here. Tax returns, bank statements, profit and loss statements, valuation reports and renovation invoices help turn a sense of unfairness into a number a judge can accept. It is not unusual for a modest case to require an accountant or valuator, and the cost of that needs to be weighed against the amount at stake.
Timing and Choosing the Court
The basic limitation period under the Limitations Act, 2002 is two years from when the claim was discovered, generally when you knew or ought to have known about the loss and that it was caused by the other party’s act or omission. In a misrepresentation case, the clock may not start on the day of the statement. It may start when you learned, or reasonably should have learned, that it was untrue. Don’t take comfort too quickly in that, though, because a defendant will argue you should have discovered the problem sooner. Contractual notice periods can be shorter, particularly in share or asset purchase agreements.
Claims of up to $50,000 belong in Small Claims Court, which offers a simpler process. Larger claims go to the Superior Court of Justice. Both sit in Brampton at 7755 Hurontario Street. Your choice of court affects cost and the procedures available, including whether you get documentary and oral discovery before trial.
First Moves If You Think You Were Misled
Start by preserving what you have: advertisements, listings, emails, texts, financial statements and any notes of conversations. Write down the statement as exactly as you can, along with who said it, when, where, and who else was there. Screenshot web pages and listings, since these often disappear.
Before you accuse anyone of lying, take care. Allegations of fraud are serious and may carry costs consequences if they are not proved. A carefully worded letter can raise the concern without overreaching. Consider what you want: money back, a price adjustment, or to exit the deal. Rescission, meaning undoing the contract, can be lost through delay or by continuing to act as if the deal stands, so raise the problem promptly once you know of it.
If a contract or business purchase is involved, a review of the paperwork is usually a sensible next step. You can read about contractual litigation on our site or contact our office to discuss your documents and the timeline. A short review will not tell you what a court will ultimately decide, but it can help you tell a real claim from a disappointing bargain.