A landlord and a tenant signed a lease agreement for a store. The landlord made a misrepresentation that the store also includes an outdoor dining area. The tenant continued to hold and use the leased premises, but refrained from paying rent and municipal taxes claiming misrepresentation and a right of set-off.
The Court held that the tenant must pay the rent and municipal taxes debt. As a rule, a breach of the duty of disclosure during the negotiation stage prior to the conclusion of a contract may amount to misrepresentation, which establishes the injured party's right to cancel the contract. However, the right of cancellation is not a duty of cancellation, and as long as the injured party does not send a notice of cancellation within a reasonable time, the agreement remains in full force and effect. Under these circumstances, the contractual obligations of the injured party remain intact, and any claim of set-off requires positive and precise proof. Here, the landlord misled the tenant regarding the inclusion of the outdoor dining area in the leased premises. However, the tenant did not terminate the agreement in a timely manner and also did not bring evidence to prove his damages in order to establish a claim of set-off. Therefore, the tenant is required to pay the full rent debt.