The Redicans entered into a contract to purchase a leasehold property on an island off Toronto from Nesbitt as represented by her agent Wing. The keys to the property were delivered and the appellants handed over a cheque, took assignment of insurance on the property, and paid some back taxes on the property. After ice had formed on the lake two days later, the appellants inspected the property and found that there had been misrepresentation (fewer bedrooms than had been stated and no electricity) at which time they stopped payment of the cheque and informed Mr. Nesbitt who immediately issued a writ for payment of the amount owing. The Redicans claim recission as a defence and as a counterclaim (fraudulent or negligent misrepresentation). At trial the jury found there had been innocent misrepresentation, but since the contract had been executed it could not be rescinded - entitled to rescission only if the property is different in substance. The appellate court upheld this decision, at which point the Redicans appealed to the Supreme Court.
- Was the contract already executed?
- Are the plaintiffs entitled to recission if the contract has been executed and there was innocent misrepresentation?
Appeal allowed, new trial ordered.
The court held that a contract for the purchase and sale of property is completed when the purchaser receives an executed conveyance and then gives a cheque for the purchase price which the vendor accepts. The fact that the cheque was stopped did not cause the contract to not be executed. The court stated that it is a longstanding rule of equity that a contract can be rescinded for an innocent representation, however holding that property right trump contractual obligations, recission was not available to the appellants after the contract was executed.
However, the court held that if there was fraudulent misrepresentation then the appellants would have an action in recission. They held that the trial judge had misdirected the jury in telling them that proof of intention deceive is essential to support such plea and in refusing to submit to them the question of whether or not the vendor made the representations without caring whether they were true or not, to induce the contract. As a result, the appeal was allowed and a new trial ordered.
An executed contract for real property cannot be rescinded for innocent misrepresentation unless the property is "different in substance".