- A misrepresentation is a false statement of fact — not opinion, and not a promise about the future — made before a contract was signed, that induced the other party to enter into it.
- Fraudulent misrepresentation is the most serious and generally opens the door to the widest range of remedies, because dishonesty is involved.
You signed a contract based on something the other side told you — a business's revenue, a property's condition, a supplier's capacity — and it turned out not to be true. Now you're wondering whether misrepresentation can get you out of a contract you already signed.
The answer depends heavily on what kind of misrepresentation happened and how serious it was. Ontario law treats a deliberate lie very differently from an honest but mistaken statement, and the remedies available differ accordingly.
This guide breaks down misrepresentation in Ontario contract law — the three recognized categories, what each one requires, and what you can actually recover.
What Counts as a Misrepresentation
A misrepresentation is a false statement of fact — not opinion, and not a promise about the future — made before a contract was signed, that induced the other party to enter into it. To rely on one, you generally need to show:
- The statement was false
- It was a statement of fact, not sales talk, opinion, or ordinary exaggeration
- You reasonably relied on it
- Your reliance actually influenced your decision to sign
The Three Types of Misrepresentation
| Type | What It Requires | Typical Remedy |
|---|---|---|
| Fraudulent | The other party knew the statement was false, or was reckless about whether it was true | Rescission, and damages in a claim for deceit |
| Negligent | The other party owed you a duty of care and carelessly made a false statement without reasonable grounds to believe it was true | Damages, and sometimes rescission |
| Innocent | The statement was false but made honestly, with no carelessness or intent to deceive | Rescission is possible; damages are limited and depend on the circumstances |
Why the Type Matters
Fraudulent misrepresentation is the most serious and generally opens the door to the widest range of remedies, because dishonesty is involved. Negligent misrepresentation requires proving the other side owed you a duty of care and fell below a reasonable standard in what it told you — this usually comes up between parties who had some closer relationship, such as a professional advisor and a client, rather than two strangers negotiating at arm's length. Innocent misrepresentation is treated more gently, since no one did anything wrong on purpose — but it can still unravel a contract if the false statement was significant enough to the deal.
Which category applies is not always obvious from the outside. The same false statement about a business's revenue, for example, could be fraudulent if the seller knew the figures were wrong, negligent if they simply failed to check numbers they should have verified, or innocent if they genuinely believed outdated information was still accurate. Sorting out which one fits your facts is often the first real question a lawyer will help you answer.
Limitation Period Considerations
Claims based on misrepresentation are generally subject to Ontario's basic limitation period under the Limitations Act, 2002 — a claim must usually be started within a set number of years of when you discovered, or reasonably should have discovered, the misrepresentation. That clock can start running well before you feel ready to act, so don't assume you have unlimited time to sue once you suspect something was misrepresented.
Steps to Take If You Believe You Were Misled
- Gather everything the other party told you before you signed — emails, listing sheets, financial statements, or verbal representations you can document.
- Compare it against what turned out to be true, and be specific about the gap between the two.
- Decide what outcome you actually want — unwinding the deal through rescission, or keeping it and seeking compensation through damages.
- Act promptly. Continuing to perform under the contract for a long time after discovering the problem can undermine a later rescission claim.
- Get legal advice before deciding how to respond, since fraudulent, negligent, and innocent misrepresentation call for different strategies and different evidence.
Frequently asked questions
Does every false statement let me out of a contract?
No. The statement generally has to be one of fact, not opinion or ordinary sales enthusiasm, and you have to show you actually relied on it in deciding to sign. Minor exaggeration that didn't affect your decision usually isn't enough on its own.
What's the difference between misrepresentation and just a bad deal?
A bad deal is one where the terms simply didn't work out in your favour — nothing false was said. Misrepresentation requires an actual false statement of fact that induced you to sign; buyer's remorse alone is not misrepresentation.
Can I get out of the contract and also recover damages?
Sometimes, though the available combination depends on which type of misrepresentation is involved and the specific facts. This is an area where tailored legal advice matters, since remedies can overlap or be mutually exclusive depending on the circumstances.
Does this apply to business purchase agreements?
Yes — misrepresentation claims come up frequently in the sale of a business, often involving financial statements, customer contracts, or the condition of equipment. If that's your situation, our buying and selling a business page covers related issues.
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