While valid contracts must be complied with, one exception to their validity is the concept of non est factum. Know more about this doctrine and how it’s applied
In some cases, contracting parties can claim the defence of “non est factum” to avoid the consequences of a contract they didn’t truly understand. However, the law doesn’t treat this defence lightly — those who plead this defence must establish certain standards before doing so. For this, common law is the best source of understanding for this legal maxim, which shows how to use and dispute this defence.
Non est factum is a Latin term that means “it is not the deed.” It is a defence used in the law of contracts, where one of the parties deny that they agreed to the contract that is subject of the dispute or in litigation. In other words, the party using this defence alleges one of the following:
A successful party who pleads non est factum can evade their alleged obligations under the contract. As an effect of this defence, the contract becomes void and unenforceable.
While it may sound convenient for a contracting party to deny a contract using non est factum, know that it is only applicable in certain circumstances. The courts would usually subject the one asserting this defence with greater scrutiny in determining whether it can be genuinely applied.
In Canada, this defence is governed by common law, which has already set some criteria on what instances it should and should not apply. But looking at the trend right now, courts tend to put a heavy burden on those who plead this defence.
The defence of non est factum is comparable to mistake — also one of the defences against the validity of a contract. Here's a video that generally explains how mistake work as a defence against the validity of a contract:
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Here are some of the examples where non est factum may apply:
when the party is an illiterate who did not understand the contract
when the party is blind, or whose vision is impaired and have not literally seen the contract
when some parts of the contract containing important provisions were not shown to the other party
when the party is person with disability or incapacitated, which prevents them from fully comprehending the contract
These are just loose examples of cases where it may apply. It’s still important that the parties claiming this defence must establish it using the elements as explained by common law.
Common law provides for the following elements to establish the defence of non est factum:
That, on a balance of probabilities, the defendant has the burden of proving this defence
That the defendant can show that there are fundamental differences between the signed contract and from what the defendant believed they were signing
That, even if the fundamental differences can be shown, the defendant was not careless in taking reasonable precautions before signing the contract
These elements are further explained by case law. One recurring factor in these cases is the allegation that the contract was different from what was explained to them. However, it mostly would fail on the requisite of absence of being careful, as when it’s shown that the defendant was indeed negligent in signing the contract.
One of the most basics in law, as found in every jurisdiction, is that a contract binds the parties that agreed to it and that it should be complied with in good faith. Although there are a lot of exceptions to this rule, the defence of non est factum does not sit well along with these other exceptions. This is why some courts have declared that this defence is only a limited one and will only apply to certain cases.
In the past, there have been varying decisions on how the defence of non est factum should apply in Canada. It was all settled in the 1982 case of Marvco Colour Research Ltd. v. Harris, [1982] 2 SCR 774.
This case arose from a mortgage contract that was executed by the defendants in favour of Marvco Colour Research. The defendants, the spouses Harris, executed the charge at the request and relying on the assurance of a third party, a person named Johnston. The assurance of Johnston was that the second document was only related to some minor adjustments to a mortgage they had earlier executed. However, it turned out that the document was actually a second charge which granted a mortgage over Harris’ property in favour of Marvco Colour Research.
The issue to be resolved by the court was whether the defence of non est factum is available to a party who carelessly fails to read the document, allowing a third party to commit fraud on another innocent party.
In holding that the defence of non est factum was not available to the Harrises, the Court explained its evolution over time. It cited several cases decided after Foster v. Mackinnon (1869), L.R. 4 C.P. 704, from which this defence sprang into prominence.
In fine, the Court held that for non est factum to apply, the defendant must not be guilty of carelessness. While some authorities may use the term negligence, what it really connotes is carelessness, and not the type of negligence under tort law.
In this defence, even if negligence has sprung from good intentions, it will still prevent a person from disowning the contract they executed. As such, they cannot plead that “their minds did not follow their respective hands when signing the document and hence that no document in law was executed by them.”
Aside from holding the negligent or careless defendants cannot invoke non est factum, the Court recognized the need for certainty and security in commercial transactions. Reading through these words, allowing a loose application of this defence would conveniently allow fraudulent parties to deny valid contracts — the very thing that non est factum pleads.
However, the Court in Marvco is quick to clarify that the finding of carelessness depends on the circumstances of each case. Before a court may determine whether a party is estopped, which prevents them from the raising this defence, the following must be considered:
As discussed above, one of the elements of non est factum is that there must be a fundamental difference between the contract and what the defendant thought it to be. This element may be traced back to Marvco, where the Court in this case said that for this defence to operate, the document must be fundamentally different, either:
In setting up a more flexible test in proving this defence, the following general phrases can be used in relation to this element:
Another important pronouncement of the Court in Marvco is the determination of liability where non est factum was pleaded but was held to be inapplicable in the case.
The question posed is — who among two innocent parties should bear the loss because of the fraud of a third party? Justice dictates that it should be the party who was in a position to avoid a loss to any of the parties by applying reasonable care.
In this case, it was ruled that, as between the Harrises and Marvco Colour Research, it should be the Harrises who should suffer the loss. Because of the spouses’ carelessness, they are then barred from setting up the defence that “their minds did not follow their hands when executing the mortgage so as to be able to plead that [it] is not binding upon them.”
The case of Meridian Credit Union Limited v. Vrankovic, 2013 ONSC 7546 is another instance where non est factum was held to be inapplicable. The plaintiff, Meridian Credit Union, argued that this defence cannot be applied to those who are “willfully blind,” to which the Court agreed.
The dispute came about when guarantees were provided by defendants, spouses Vrankovic, for term loan made to the husband’s company. The Vrankovics signed an unlimited, continuing guarantee for such a loan. In raising the defence of non est factum and unconscionability, the wife alleged that:
However, the Court held that this defence was incredible, considering that she has already stayed in Canada for 40 years. To add, it was ruled that she had every opportunity to inquire into what she was signing for, either to her husband or to the lawyer who assisted her in signing the document. While she ultimately trusted her husband, there was no evidence that he coerced, bullied or forced her to sign, or that she did not have an operating mind.
For these reasons, the defence of non est factum does not apply to those who are willingly blind, such as the defendants in this case. The guarantee was held to be valid and enforceable against both defendants, and the plaintiff is entitled to the amount owed to it.
Given all these limitations and the high bar set by common law for the defence of non est factum, there are still cases where the court allowed its application. Common themes among these cases are the presence of vitiated consent, such as when it’s obtained by fraudulent means or by undue influence.
The case of Servello v. Servello, 2014 ONSC 5035 held that the defence of non est factum was sufficient to void a transfer of property when done through undue influence.
Here, the mother, Rosina, sought an action against her son, Antonio, to restore her sole ownership over the subject expanded home property. The title of this property was initially transferred to her when her husband died. Rosina alleged the defence of non est factum, testifying that Antonio made her sign a document, which he claimed to be a document giving him the power to look after her as she grew older. It turned out that it was really a document that transferred the property to Antonio as sole owner. She further alleged that “[s]he was still upset and grieving the loss of her husband at the time and she was not aware that she was transferring a property to [Antonio].”
In restoring Rosina as the sole owner of the subject property, the Court held that the doctrines of non est factum and mistake apply, which are sufficient to void its transfer. Rosina’s personal circumstances were considered; that her first language is Italian and her comprehension and reading of the English language is limited. Her not receiving independent legal advice also came into play.
Non est factum is a powerful defense against a contract, but it is far from being a catch-all solution for those seeking to avoid their obligations and contractual woes. For now, courts apply this defence with caution, and parties using this defence must likewise not rely on this alone. As it is, clear evidence is required to allow the voiding of a contract using this defence, not to mention that the party pleading this must not be careless or negligent. Simply put, as stated in Marvco, “the principle would come into play on rare occasions.”
Do you have any questions regarding the defence of non est factum? Let us know in the comments section below!
