In Houle, the appellants (the Houles) had
obtained a written assessment that certain land contained
approximately 500,000 tonnes of gravel. The assessment was given to
the respondents, Knelsen Sand and Gravel Ltd, who came to a similar
conclusion. On that basis, Knelsen and the Houles negotiated a
price of $800,000 for Knelsen to excavate and take the gravel. This
agreement was memorialized in a contract which, at the Houles'
request, included the following "whole agreement" clause
[at para 4]:
The Purchaser acknowledges that he has inspected the property
and that he is purchasing the property as is and that there is no
representation, warranty, collateral agreement or condition
affecting the property or this offer other than as expressed herein
After purchase, Knelsen discovered the land only contained
74,000 tonnes of economically extractable gravel, and so withheld
the final payment. The Houles sued and Knelsen counterclaimed for
breach of an implied term of the contract and for both innocent and
negligent misrepresentation. The trial judge found that the Houles
had made an innocent misrepresentation by giving the assessment to
Knelsen because the assessment was a representation of
"fact" rather than an opinion, and granted rescission of
On appeal, the Court of Appeal reversed the trial decision and
gave judgment to the Houles, holding that Knelsen was not entitled
to rescind on the basis of innocent misrepresentation. The Court
noted an inconsistency in the trial judgment: while the lower Court
found there was no implied covenant that the land contained at
least 500,000 tonnes of gravel, it awarded a remedy that reflected
just such a covenant. As well, the fact that the lower Court
rejected the claim for negligent misrepresentation, but then
provided relief for an innocent misrepresentation, offended the
principle that "relief cannot be provided for an innocent
misrepresentation which is inconsistent with the express covenants
in the contract." The Court further noted that the alleged
misrepresentation was an opinion rather than a representation of
fact: neither the Houles nor the agency that prepared the
assessment ever claimed to know how much gravel was actually
present in the land. As such, a finding of innocent
misrepresentation was not available.
The Court then went on to discuss the impact and importance of
the "whole agreement" clause, noting that the clause
would have resolved the entire matter if the trial judge had
applied it. Such clauses, the Court noted, are not inherently
objectionable, being "found in most commercial
contracts". Instead, they serve the dual purpose of
"confirming the scope of the agreement, and allocating the
risks between the parties". The Houles had insisted on the
inclusion of the whole agreement clause, which disclaimed "any
'representation... affecting the property'"; this
included both innocent and negligent misrepresentations. The whole
agreement clause, like all other clauses, "must be interpreted
in accordance with the intentions of the parties as reflected in
the words used in their ordinary and grammatical meaning,
consistent with the surrounding circumstances known to the parties
at the time of formation of the contract". The purpose of the
clause was that parties' obligations would be "determined
in accordance with the written terms of the contract, not
extraneous negotiations and discussions that have not been reduced
to writing, and thus formally acknowledged by the contracting
parties." In this case, the Houles and Knelsen had agreed that
there were no outside representations affecting the contract. Thus,
properly applied, the whole agreement clause excluded any
misrepresentation – negligent or innocent.
Houle confirms that properly-worded whole
agreement clauses are effective to exclude liability for innocent
and negligent misrepresentations. If a party to a contract wishes
to rely on a representation, it should ensure that the
representation is memorialized within the contract itself, or more
precariously, not include a whole agreement clause. Conversely, if
a party wishes to ensure that an agreement sets out the entire
agreement and excludes additional representations, a whole
agreement clause should be included.
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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