Be careful what you sign: non est factum remains a difficult defence to establish

Non est factum is a common law doctrine dealing with a mistake as to the nature of a contract. The doctrine arises in the context of a written contract where one party disputes that they ought to be held responsible at all for anything under the contract, even though the contract names them as a party and the document contains their signature.[1] Specifically, the doctrine of non est factum protects a party that signs a contract under a fundamental misapprehension as to its nature or effect. Where it applies, non est factum renders the contract void.[2] As a result, if a party can establish that non est factum applies, it can be a total defence to a claim.

When a party raises a non est factum defence, the court considers the following:

1. The burden of proving non est factum rests with the party seeking to disown their signature. For a person of full capacity the application of the doctrine must be kept within narrowly prescribed limits.
   
2. The person who seeks to invoke the remedy must show that the document signed is fundamentally different from what the person believed he or she was signing.
   
3. Even if the person shows such a fundamental difference, the court must examine whether the signer was careless in failing to take reasonable precautions in the execution of the document. The court must also consider the conduct of the party relying on the document and whether they qualify as an innocent party, in order to determine which party, by application of reasonable care, was in the better position to avoid the loss.[3]

1401946 B.C. Ltd. v Vanhome Ventures 2 Holdings Ltd., 2026 BCSC 1753 recently confirmed that non est factum remains a narrow and exceptional defence that is difficult to invoke. The facts of the case include:

1. A lender provided mortgage financing to a borrower.
   
2. Several parties provided guarantees regarding the mortgage financing. The guarantees were unlimited.
   
3. The lender commenced foreclosure proceedings and sought to enforce the guarantees.
   
4. Two of the guarantors sought to avoid liability on the basis of non est factum. Among other things, they asserted:

(a) that their understanding of English was “very limited” and “very rudimentary”;

(b) based on an explanation from another individual (unrelated to the lender), they (mistakenly) understood that the guarantees they were providing were limited in amount; and

(c) the guarantees were written in English and they did not receive an explanation of the documents at the time they signed the guarantees.

In the result, the Court found that the guarantors’ non est factum defence was not established because:

1. The guarantors knew they were signing guarantees. The fact that the guarantees were unlimited, rather than limited in amount, did not render them fundamentally different from the guarantees the guarantors believed they were signing.
   
2. By failing to make the necessary inquiries to properly understand the guarantees, including seeking clarification or translation of the documents, the guarantors were not permitted to rely on the defence of non est factum.
   
3. There was no evidence that the lender knew about the guarantors’ misapprehension regarding the scope of the guarantees.

The case highlights the importance of reviewing and understanding contractual documents before signing them. In the normal course, it is very difficult for a party to avoid contractual liability on the basis that it misunderstood the nature or effect of the document it signed.

[1] Bruce MacDougall, Introduction to Contracts, 5th ed (Toronto: LexisNexis Canada Inc, 2022) at section 16.02

[2] Brandon Kain, Good Faith in Canadian Contract Law (Toronto: LexisNexis Canada Inc, 2024) at section 4.02[7][a]

[3] Farrell Estates Ltd. v Win-up Restaurant Ltd., 2010 BCSC 1752 at paragraph 100

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