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The Canadian approach to negligent misrepresentation: a critique of the reliance model of liability Fairlie, John

Abstract

This thesis is presented on recent developments in the law of negligent misrepresentation in Canada, focusing on the debate surrounding the appropriate basis of liability and its significance in commercial settings. Since Hedley Byrne first opened up the law of negligence to careless words and economic loss, there has been some confusion as to the precise nature of the duty of care. Two models of liability have competed for recognition, one based on voluntary assumption of responsibility by the defendant and one based on reasonable reliance by the plaintiff. The former is in fact a hybrid model of liability which has elements of traditional contract and traditional tort liability. The latter is more consonant with traditional tort liability alone. In 1997, the Supreme Court of Canada adopted the reliance model of liability. In considering the appropriateness of the reliance approach, I examine the underlying philosophies and policy objectives relevant to tort law generally and negligence law specifically. The significance of corrective justice and distributive justice theories are considered, the latter increasingly being raised in argument- before the courts. The role of economic efficiency in determining the appropriate form of liability is also considered. A large part of my research concerns the interplay of the many other policies, some conflicting, which the courts have identified as part of the duty of care issue in negligence. Some of these policies include the need to deter harmful behaviour, the desire to promote independence and self-sufficiency, and concerns about overlap with contractual principles. I argue that in adopting the reliance model Canada's highest court has sacrificed, among other things, coherence of approach by the law to economic dealings and certainty in the law's application. I argue that a hybrid model based on voluntary assumption of responsibility or consent is the most effective way to balance the competing policies and theories of responsibility in this area.

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