OREA Contract Law for Real Estate 3 — Questions and Answers
Question 1: In Ontario real estate, what is 'misrepresentation' and what are its consequences?
- A minor exaggeration that has no legal consequence
- A false statement of fact that induces a party to enter the contract, which may render the contract voidable and give rise to damages (Correct answer)
- Only applies to statements made in advertising
- Is only relevant if made in writing
Correct answer: A false statement of fact that induces a party to enter the contract, which may render the contract voidable and give rise to damages
Misrepresentation occurs when a false statement of material fact is made that induces the other party to enter the contract. It can be innocent, negligent, or fraudulent. The affected party may seek rescission of the contract and/or damages depending on the type.
Question 2: What is the difference between 'fraudulent misrepresentation' and 'negligent misrepresentation' in Ontario real estate?
- There is no legal difference
- Fraudulent misrepresentation involves intentional deception; negligent misrepresentation involves a failure to exercise reasonable care in making a statement (Correct answer)
- Negligent misrepresentation is more serious than fraudulent
- Both require proof of intent to deceive
Correct answer: Fraudulent misrepresentation involves intentional deception; negligent misrepresentation involves a failure to exercise reasonable care in making a statement
Fraudulent misrepresentation requires proof that the statement was made knowingly, without belief in its truth, or recklessly. Negligent misrepresentation occurs when a person with a duty of care makes a statement without exercising reasonable care to verify its accuracy.
Question 3: In Ontario, what is 'undue influence' in the context of a real estate contract?
- The influence of market conditions on property prices
- When one party uses their position of power or trust to unfairly pressure another party into entering a contract (Correct answer)
- Pressure from a real estate agent to make a quick decision
- The effect of interest rates on property values
Correct answer: When one party uses their position of power or trust to unfairly pressure another party into entering a contract
Undue influence occurs when one party exploits a position of power, trust, or dominance over another to pressure them into a contract they would not have entered freely. Contracts entered under undue influence are voidable.
Question 4: What is 'duress' in Ontario real estate contract law?
- Financial hardship of the buyer
- The use of threats, force, or coercion to compel a party to enter into a contract against their will (Correct answer)
- The stress of the closing process
- Time pressure to meet a deadline
Correct answer: The use of threats, force, or coercion to compel a party to enter into a contract against their will
Duress involves the use of threats (physical, economic, or otherwise), force, or coercion to compel someone to enter a contract. A contract entered under duress is voidable because the party's consent was not freely given.
Question 5: In Ontario, what is the 'parol evidence rule' in real estate contracts?
- A rule requiring all contracts to be oral
- A rule that generally prevents parties from introducing prior or contemporaneous oral evidence to contradict, vary, or add to the terms of a written contract (Correct answer)
- A rule about parole conditions for property offences
- A rule requiring witnesses for all contracts
Correct answer: A rule that generally prevents parties from introducing prior or contemporaneous oral evidence to contradict, vary, or add to the terms of a written contract
The parol evidence rule provides that when parties have put their agreement in writing, they cannot introduce prior or contemporaneous oral statements to contradict, vary, or add to the written terms. Exceptions include fraud, mistake, or ambiguity.
Question 6: What is 'quantum meruit' and when does it apply in Ontario real estate?
- A type of mortgage calculation
- A claim for the reasonable value of services rendered when there is no valid contract, preventing unjust enrichment (Correct answer)
- A method of calculating property taxes
- A type of construction estimate
Correct answer: A claim for the reasonable value of services rendered when there is no valid contract, preventing unjust enrichment
Quantum meruit ('as much as deserved') allows a person to claim the reasonable value of services or work performed when no valid contract exists or the contract is unenforceable. In real estate, it may apply when a registrant provides services but the listing agreement is invalid.
OREA Contract Law for Real Estate 3
In Ontario real estate, what is 'misrepresentation' and what are its consequences?