Dear Colleagues:

I had a chance to pursue the Draft Act and with the greatest respect to the Drafters (some of whom are on the ODG) I would have some serious reservations about passing such legislation in Ontario.

First, I would question the need for such legislation which for the most part attempts to restate the relevant rules (with some significant tweaks). To my mind, there is very little in the Act that could not be done or solved by an appeal to the SCC on some of the more contentious issues (such as whether the dominant party must be aware of the disadvantage). Likewise, I do not agree with the Reports position that in order to determine whether a term should be implied into a contract a "complex analytical task" is "required under the current law" (p. 36) which the Report uses as its justification for implying a duty of good faith into every contract. I would also be concerned with ossifying many of the rules that are still rather poorly understood (lawful act duress, for example). 

Second, I would question whether the rules have been restated correctly.  For example, the draft act states that "A contract is procedurally unfair if a party to that contract is materially
disadvantaged in relation to another party to the contract because the first party (c) has been induced to enter into the contract by compulsion of the
will, including threats, harassment or illegitimate pressure".  My understanding of duress is that the threat has to be one that is unlawful or illegitimate, not any threat will do--but one would not get to that position relying on the words of the Draft Act.  I also wonder if it is always necessary in Duress to prove that the transaction was substantively unfair (as the Act contends) in order to undo that transaction.  If you put a gun to my head and force me to transfer shares to you at today's market price and the next day the market falls am I always disabled from reclaiming the shares from you as the Report seems to claim?

Another example, the Draft act states that: "In the following cases, non-disclosure by a person (the “first person”) of a material fact known to him or her before or at the time the first person makes a contract with another person (the “second person”) is deemed to be a misrepresentation that the material fact does not exist: (d) if the first person knows that remaining silent creates a false impression of the fact to the second person".  Although I am no expert on this area of law, the case that the Report relies on for this proposition (Brownlie v. Campbell) states, in distinction to the wording of the text, that the relevant rule is hinged on their being a pre- existing duty to speak in addition to the intention to create the false impression ("where there is a duty or an obligation to speak, and a man in breach of that duty or obligation holds his tongue and does not speak, and does not say the thing he was bound to say, if that was done with the intention of inducing the other party to act upon the belief that the reason why he did not speak was because he had nothing to say, I should be inclined myself to hold that was fraud also").

I would be very interested in others' views as well.

Sincerely,

 

Jason Neyers
Associate Professor of Law
Faculty of Law
University of Western Ontario
N6A 3K7
(519) 661-2111 x. 88435 

On 9/29/2011 6:26 AM, Hector MacQueen wrote:

News from the British Columbia Law Institute likely to interest this group -

The British Columbia Law Institute has published today its Report on Proposals for Unfair Contracts Relief. The report recommends that British Columbia enact a Contract Fairness Act to consolidate and modernize the leading concepts that contract law deploys against contractual unfairness.

?The current law on contractual unfairness is largely found in court cases and this body of precedent contains needless complexities, gaps, and uncertainties,? noted committee chair Prof. Joost Blom, QC. ?The time is ripe to address these issues and make the law more certain and accessible by enacting legislation.?

The proposed Contract Fairness Act will clarify vexing ambiguities in the application of unconscionability, duress, and undue influence, create a framework for integrating those concepts, provide for a duty of good faith in the performance of contracts and supply a definition of ?good faith,? and address concerns about remedies for misrepresentation.

Copies of the report and two backgrounders summarizing its contents and main arguments are all available for downloading at no charge on the Unfair Contracts Relief project page, http://bcli.org/bclrg/projects/unfair-contracts-relief.