Identifying and mitigating

commercial risk:
Lessons from recent case law

Kelli Patel and Chloe Snider

With special thanks to Caitlin Choi

November 2, 2017
 Introduction and outline

• Contract formation
• Formation by email
• Oral amendments

• Duty of good faith

• Timing and scope

• Specific clauses
• Forum selection and choice of law clauses

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Contract formation – Email agreements

Vancouver Canucks Limited Partnership v. Canon Canada Inc., 2015 BCCA 144
• Parties entered into negotiations to renew existing agreements
• Dispute concerned whether there was a binding new agreement
• Court upheld finding that parties had entered into a new sponsorship agreement
through emails sent between them:
• Emails contained the essential terms of the new sponsorship agreement
• Canon wanted to continue its sponsorship agreement with the “same rights and benefits” as before
and the Canucks agreed

• While the parties had understood that a formal written agreement would be executed by the
parties after review by each party’s legal department, such execution was a mere formality

• Sponsorship benefits were implement by the Canucks and Canon accepted those benefits
notwithstanding that the agreement had not been executed

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Contract formation – Email agreements
Coco Homes Inc. v. Caleron Properties Ltd., 2017 ABQB 15
• Court found that an exchange of emails formed a binding settlement agreement, based
on the words and conduct of each party’s counsel

Pintar Manufacturing Corp. v. Consolidated Wholesale Group Inc., 2011 ONCA 805
• Court found that personal guarantee had been entered into by way of emails
• All of the elements necessary to create a binding guarantee were present: the amount
of debt was clear, the debt had crystallized, the appellant knew the terms of the
contract giving rise to the debt, and the appellant provided an email signature

C&S Associates UK Ltd. v. Enterprise Insurance Company Plc, 2015 EWHC 3757
• Dealt with whether a contract between an insurance claims handler and an insurance
provider was varied by an exchange of emails
• Court found the parties intended to be bound by their exchange, despite contemplating
that their agreement would later be recorded in a formal contract

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Contract formation – Email agreements

• Practical implications:

• Negotiating parties (lawyers or business representatives) should understand that a

binding agreement can be by reached by email
• Possible email caveat:

“Nothing in this email communication constitutes a binding agreement until all

terms are agreed and finalized in writing and a written agreement is executed by
the parties.”

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Contract amendment – Oral amendments

• No oral amendment clauses (particularly in entire agreement clauses) are

common:
“No change or modification of this agreement is valid unless it is in writing and signed by
each party.”

• Recent English and Nova Scotia case law suggest that (certain) courts
may enforce an oral agreement or amendment in the face of such a
clause
• Based on principle of party autonomy and freedom to contract

• BUT – recent Ontario case law continues to emphasize the importance of

entire agreement clauses

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Contract amendment – Oral amendments

Globe Motors Inc. v. TRW Lucas Varity Electrics Steering Ltd., [2016] EWCA 396
• Court rejected the idea that an anti-oral agreement provision needed to be enforced for the
benefit of commercial certainty
• A general principle of English law is that absent statutory or common law restrictions,
parties have the freedom to contract
• An anti-oral agreement clause cannot undermine that freedom

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Contract amendment – Oral amendments

Archibald v. Action Management Services Inc., 2015 NSCA 103

• Clause required that any waiver of the lease in question be in writing
• Issue was whether this precluded the parties from agreeing orally that the tenants would be
released from their obligation to pay further rent
• Court held that the first step is to determine if the no waiver or no oral amendment clause
applies to the circumstances
• In this case, the no waiver clause did not apply to the circumstances

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Contract amendment – Entire agreement clauses

But…

Parc Downsview Park Inc. v. Penguin Properties Inc., 2017 ONSC 4533
• Court stated that where there is an entire agreement clause there can be nothing beyond
the written contract which informs the substance of the agreement
• In this case, the entire agreement clause contained specific anti-oral agreement language

• In applying this rule, the court held that there could be no action for negligent
misrepresentation based on an oral inducement, as it would be outside the written
provisions of the contract

• Entire agreement clauses still prevent relying on past representations or

agreements (Treats v. Burloak, 2017 ONSC 5692)

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Contract amendment – Oral amendments

• Practical implications:

• Continued inclusion of anti-oral amendment clauses in commercial contracts

• Awareness of oral representations (particularly after entering into the contract)

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Duty of good faith

Connor v. Scotia Capital Inc., 2017 ONSC 2804

• Court explained that the duty of honesty and good faith in Bhasin v. Hrynew, 2014 SCC 71,
does not extend to contract negotiation
• Bhasin focuses solely on performance

Bank of Montreal v. Javed, 2016 ONCA 49

• Appellants argued that Bhasin modified the test for unconscionability by requiring the court
to import “a general organizing principle of good faith and recognizing a duty to perform
contracts honestly”
• Court rejected this proposition

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Duty of good faith

• Courts have given a narrow interpretation to Bhasin

• Practical implications:
• Keep in mind that the opposing party has no obligation to negotiate in good faith
• Still need to include any specific terms that you want (can’t necessary rely on the duty of
good faith)
• Agreements to negotiate in good faith

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Forum selection clauses

• Common contractual term

• Z.I. Pompey Industrie v. ECU-Line NV, 2003 SCC 27

• Required “strong cause” to get around a forum selection clause

• Recent case law has addressed the difference between commercial and
consumer contracts

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Jurisdiction clauses continued

Douez v. Facebook, 2017 SCC 33

• SCC refused to enforce a forum selection clause in the context of an online consumer
contract because of public policy considerations (namely, gross inequality of bargaining
power and greater interest of Canadian courts in adjudicating cases involving constitutional
and quasi-constitutional rights such as privacy)

2Source Manufacturing Inc. v. United Technologies Corporation, 2017 ONSC 4409

• Although Douez established a different framework for consumer contracts, the court
expressly confirmed that Pompey remains the governing authority on the enforceability of
forum selection clauses in the commercial context
• Clause in question was enforceable

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Forum selection clauses

• Practical Implications:

• Considerations:
• Costs

• Location of witnesses

• Your assets

• The other parties’ assets

• Other relevant agreements/corporate structure

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Forum selection clauses – related issues

• Mediation and arbitration clauses

• Gradual escalation
• Confidentiality
• Enforcement

• Choice of law clauses

• Which law is most favourable
• Proving foreign law

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Thank you

Kelli Patel: [email protected]

Chloe Snider: [email protected]

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