Reproduced from Practical Law with the permission of the publishers. For further information, visit www.practicallaw.com or call +44(0)20 7542 6664.
Canada-specific information concerning the key legal and commercial considerations when drafting a consumer contract.
General contract law framework
- What are the requirements under national law for a valid contract to exist?
The Canadian legal system is based on the common law tradition of the United Kingdom. In this respect, common law principles in Canada, such as those found in the law of tort, contract or property are quite similar to those of the United States and the United Kingdom. Sale of goods and consumer protection legislation varies across the provinces and territories of Canada. The information below focuses on Ontario, as it is generally similar to the other provinces, and Quebec, as it stands as an exception.
Quebec's legal system evolved from the French civil law system. In Quebec, as a general rule, the civil law system applies to private law matters while the common law system applies to public law situations. Thus, to the extent Quebec is empowered by the Canadian Constitution to make private laws, Quebec uses a civil code, namely, the Civil Code of Quebec (Civil Code).
For a contract to be valid and enforceable under Canadian law, there must be:
- Offer and acceptance.
- A lawful purpose.
An offer, acceptance, and consideration are required elements in every valid agreement. An offer is made when one party (the offeror) signifies to the other party (the offeree) their intention to enter into a contract on certain terms. Acceptance occurs when the offeree signifies their willingness to accept the terms offered by the offeror. Once the offer is accepted, value (item or service) must be exchanged between the parties in order to satisfy the consideration element.
All valid contracts require that the parties have the capacity to understand the terms and nature of the agreement. Parties to an agreement must be able to freely consent to the terms proposed. In Canada, an agreement with the purpose of violating any law is not valid.
A contract or agreement takes effect when the offer has been accepted, assuming all other requirements are fulfilled.
In Quebec, freedom to contract is one of the fundamental principles of civil law. This is established in the Civil Code, which emphasizes the importance of intention to contract. Article 1378 of the Civil Code defines a contract as "an agreement of wills" and Article 1386 of the Civil Code states that the exchange of consents can be accomplished either by the express or tacit manifestation of the will of a person. These principles also apply to consumer contracts. However, for consumer contracts, promises or agreements prior to contract are not binding (Article 24, Consumer Protection Act (Quebec) (CPAQ)).
- Does national law make a distinction between an offer and an invitation to treat? Are the circulation of price lists, catalogues, advertisements for sale and the display of items in a shop treated as an offer or as an invitation to treat?
Provinces do distinguish between an offer and an invitation to treat. An offer is made when one party (the offeror) signifies to the other party (the offeree) their willingness to enter into a contract with that other party on certain terms. For an offer to be valid there must be conduct and language showing that the party intends to be legally bound.
The distinguishing feature of an offer, as opposed to an invitation to treat, is that an offer creates an intention to be bound by the next communication of the offeree. An invitation to treat is a statement indicating a general commercial intent, that is, a desire to make a contract with the party to whom the statement is addressed if a suitable arrangement can be reached. Language and surrounding circumstances will help determine if something was an offer or an invitation to treat.
The commercial tendering process is an invitation to treat. Similarly the following are typically treated as invitations to treat:
- The display of goods in a store.
- Publication of catalogues.
- Price lists.
A distinction is drawn when a seller publishes a price list or catalogue and distributes that price list or catalogue to consumers instead of merchants. This puts the seller at some risk that, without a clear warning by the seller that it has a right to change the prices or refuse an order, it will be held to be making an offer capable of acceptance for at least as long as the catalogue is stated to be current. However, even in the circumstances of a consumer transaction, a court would consider the buyer's actual knowledge of the seller's policies or expectations in determining whether to hold a seller to its published prices.
In Quebec, any offers, promises or agreement prior to a contract are not binding (Article 24, CPAQ). Also, an offer to contract made to a determinate person constitutes a promise to enter into the proposed contract from the moment that the offeree clearly indicates to the offeror their intent to consider the offer and reply to it within a reasonable time or within the time stated in the offer (Article 1396, Civil Code). A mere promise is not equivalent to the proposed contract.
- Is it necessary for the price of goods or services to be clearly stated for a contract to exist?
Under commercial law, it is not necessary for the price of goods or services to be clearly stated for a contract to exist. In Ontario, the price may be fixed by the contract or may be left to be fixed in a manner agreed by the parties or determined by the course of dealing between the parties (Sale of Goods Act).
Where the price is not determined by the contract or in the course of dealing between the parties, the buyer is required to pay a "reasonable price". What constitutes a reasonable price is a question of fact, dependent on the circumstances of the particular case.
However, a failure to agree to a price in a contract for the sale of goods may indicate the parties have not yet reached a binding contract. Problems can also arise where parties agree on an "initial price" but then "agree to agree" with respect to future price increases without any defined mechanism. Normally, an "agreement to agree" is unenforceable as it is not sufficiently certain.
Consumer protection legislation varies from province to province. Depending on the type of agreement, in Ontario, under the Consumer Protection Act 2002, the supplier must disclose certain information before a consumer enters into the agreement. For internet agreements, the supplier must disclose to the consumer an itemised list of the prices at which the goods and services are proposed to be supplied to the consumer, including taxes and shipping charges. The supplier must also include a description of each additional charge that applies, or may apply, such as customs, duties or brokerage fees, and the amount of the charge if the supplier can reasonably determine it.
A consumer may cancel an internet agreement within seven days if the supplier did not disclose the required information, including price.
In Quebec, no cost may be claimed from a consumer unless the amount of the cost is precisely indicated in the contract (Article 12, CPAQ). This is a general requirement that applies to all types of consumer contracts in Quebec.
- Is it necessary for a contract for the sale of goods or supply of services to be in writing for it to be valid? Are any formalities necessary?
In general, there is no national requirement for contracts for the sale of goods to be in writing. In Ontario, section 4 of the provincial Sale of Goods Act states that a "contract of sale may be made in writing, either with or without seal, or by word of mouth or partly in writing and partly by word of mouth, or may be implied from the conduct of the parties."
Various pieces of federal and provincial legislation (and in particular, provincial sale of goods legislation) set out that some documents, but not all, must be evidenced "in writing" and signed by the parties to be valid and binding. For example, in Alberta, contracts for the sale of any goods of CAD50 or more must be in writing, unless the buyer accepts part of the goods and actually receives that specific part (section 6, Sale of Goods Act, Revised Statutes of Alberta 2000 Chapter S-2).
Under the Ontario Consumer Protection Act 2002, various types of consumer contracts are only enforceable against a consumer if they are in writing. For example, under Ontario's legislation, a "future performance agreement" for the provision of goods or services to a consumer in excess of a prescribed amount is not binding on the consumer unless it is in writing and the consumer is given a copy of the contract. The contract must include all terms relating to price, credit and warranty. While as a matter of practice, a commercial seller will usually want consumers to sign a copy of such contract, signing is generally not a requirement, and these contracts can be entered into electronically. If the consumer does not receive a written copy of the agreement, the consumer may cancel the contract. A consumer has significantly broader scope for enforcing oral representations against a commercial seller. However, there are certain consumer agreements in Ontario that require the signature of both the consumer and the supplier, along with a number of other formalities in order to be valid. These include, time share agreements, personal development services agreements, loan brokering and credit repair agreements and certain direct agreements.
There are no other formalities with respect to a contract for the sale of goods, aside from the requirements for the formation of a valid contract.
In Quebec, many types of contracts do not need to be in writing, since a contract is formed by the sole exchange of consents between persons having capacity to contract (Article 1385, Civil Code). However, Article 23 of the CPAQ lists types of contract that need to be in writing:
- Contracts entered into by itinerant merchants.
- Contracts of credit.
- Contracts relating to automobiles and motorcycles.
- Contracts of lease with guaranteed residual value.
- Service contracts involving sequential performance for instruction, training or assistance.
- Contracts of service involving sequential performance made between a consumer and a merchant who operates a physical fitness studio.
- Contracts involving sequential performance for a service provided at a distance.
If certain provisions of the CPAQ with regards to the formation of the contract are not observed, a consumer may demand nullity of the contract (Article 271, CPAQ). The provisions to be observed are set out in Articles 25 to 28 of the CPAQ, and only apply to the contracts which need to be in writing. The provisions are:
- The contract must be drawn up clearly, in duplicate and, except in the case of a distance contract, in paper form.
- The contract and the documents attached thereto must be drawn up in French but may be drawn up in another language if the parties expressly agree.
- Where drawn up in French and in another language, in the case of a divergence between the texts, the interpretation more favourable to the consumer prevails.
- Except for credit card contracts, the merchant must sign the written contract duly filled out, give it to the consumer and grant the consumer sufficient time to become aware of its terms and scope before signing it.
- Except for credit card contracts, the signature of the parties must appear on the page of each copy of the contract, at the end of all the conditions.
Moreover, such contract is only validly concluded when the parties have signed it (Article 30, CPAQ).
Distance contracts also need to be in writing (Article 54.6, CPAQ).
- Does national law allow for a contract to be declared void in the event of mistake by one or both of the parties? Are any other remedies available?
In Canadian contract law, mistakes may be either bilateral or unilateral. Under the umbrella of bilateral mistakes there are:
- "Common mistakes", where both parties are mistaken and their mistake is the same.
- "Mutual mistakes", where both parties are mistaken, but their mistakes are different.
Finally, a "unilateral mistake" is where only one party is mistaken as to the terms of the agreement.
When a court is seized with the question of mutual mistake between parties, it must determine if there was in effect a valid contract. In such cases there may not be a meeting of the minds sufficient to create a contract if the parties have divergent conceptions of the essential terms or fundamental assumptions on which the contract is based. As such, the courts should take a three-pronged approach to determining whether a mutual mistake has prevented the formation of a binding agreement:
- Has there been a mistake?
- Was there, on an objective basis, a meeting of the minds notwithstanding any alleged mistake?
- If not, is the mistake fundamental?
A common mistake in assumptions will render a contract either void at law or voidable in equity. This is so because the parties have made false assumptions going to the root of the contract. The test employed by the courts is whether the mistake has altered the contract to be "different in kind".
If the parties do not satisfy the "different in kind" test, they may look to equity for relief, as the contract may be voidable in equity. For a contract to be voidable in equity, the parties must have contracted under a common and fundamental misapprehension either as to the facts or their relative and respective rights. Further, a contract will be set aside if it is unjust in all the circumstances to enforce it and if the party seeking relief is not at fault.
A contract is not void in the instance of a unilateral mistake. Nor is a contract generally voidable in the case of unilateral mistake. That is, if one party entered into an agreement under a mistake that was not known to the other party and not induced by the other party, the contract cannot be invalidated on this basis.
Other remedies (rectification)
Rectification is an equitable remedy. As such, it is subject to restrictions in certain circumstances, such as:
- The intervention of the rights of a third party.
- Affirmation of the contract with knowledge of the mistake.
- Bad conduct by the party seeking relief.
Rectification is a remedy for mistake where the written agreement can be shown to be an incorrect expression of the parties' actual agreement. Rectification is a remedy of limited use and only appropriate where the relations between the parties will continue after the date of judgement.
In Quebec, the remedies available in the event of mistake by one or both of the parties depend on the nature of the mistake, since a merchant is bound by its written and verbal statements.
- Does national law allow for a contract to be declared void in the event of misrepresentation by one of the parties? Are any other remedies available? Can silence constitute misrepresentation?
In contract law, misrepresentations made before formation of a contract can be categorised as innocent, negligent or fraudulent misrepresentations. These categories can be broadly defined as follows:
- Innocent misrepresentation. An innocent misrepresentation is a statement made which was not known to be incorrect by the party making it.
- Negligent misrepresentation. A party may bring an action in tort for a negligent misrepresentation made during pre-contractual negotiations, where a party has reasonably relied to its detriment on either statements made or a failure to provide relevant information by the other contracting party. The party alleged to have made the misrepresentation must be knowledgeable in the area or have known that the other party was reasonably relying on them. For a successful action, the misrepresentation must be untrue, inaccurate, or misleading and may be implied rather than express.
- Fraudulent misrepresentation. If a party to an agreement engages in fraud the contract is voidable, but not void. To establish fraud, the innocent party must show that a false representation has been made knowingly, without belief in its truth, or recklessly.
Where misrepresentation occurs, the type of misrepresentation can determine the remedies available:
- Innocent misrepresentation. The remedy for innocent misrepresentation is the equitable remedy of rescission, which is available where the transaction can in fact be undone and the parties put back into their pre-contract positions and the innocent party has moved very quickly to claim the remedy. Further, innocent misrepresentation does not entitle the party to sue for damages.
- Negligent misrepresentation. If the misrepresentation is sufficiently large, it may void the contract, warrant damages, or both. Further, the innocent party can bring an action in tort for negligent misrepresentation.
- Fraudulent misrepresentation. If a party can establish fraud they may claim rescission or sue in tort for damages for deceit. A court will award damages sufficient to put the party in the position that it would have been in had the contract not been made. Silence is insufficient to prove the tort of deceit unless the contract is one of the utmost good faith or where a fiduciary relationship exists between the parties. An intentional suppression of facts may constitute misrepresentation and an active concealment of a fact is equivalent to a positive statement that the fact does not exist.
As a general rule, parties are not under a duty of loyalty or disclosure when entering into a contract. Unless there is an existing duty of care, statutory duty to disclose, or a fiduciary duty which may arise based on the circumstances, silence by a party is not a representation and therefore not a misrepresentation. There are, however, three important circumstances in which silence or non-disclosure will be analogous to misrepresentation:
- Partial disclosure of true facts creating a misleading impression.
- Active concealment of the truth.
- The duty to disclose where a change in circumstances affects the veracity of a previous statement.
Most provinces have consumer protection legislation which protects against unfair practices. Under the Ontario Consumer Protection Act, it is an unfair practice for a person to make a false, misleading or deceptive misrepresentation or an unconscionable representation. Any agreement entered into by a consumer after or while a person has engaged in an unfair practice may be rescinded by the consumer and the consumer is entitled to any remedy that is available in law, including damages. A court may award exemplary or punitive damages in addition to any other remedy in an action based on an unfair practice.
In Quebec, a misrepresentation by a merchant is a prohibited practice which allows a consumer to void the contract (Article 253, CPAQ). Silence can be equivalent to a misrepresentation (Article 228, CPAQ). In the event of misrepresentation, the consumer can also claim for damages, including punitive damages as described in the case Richard v Time Inc (Article 272, CPAQ).
- Is it possible to exclude liability for misrepresentation?
Generally speaking, Canadian courts will apply a three-part test for determining when a limitation or exclusion of liability clause will be upheld:
- Does the limitation or exclusion clause apply to the facts?
- Is the clause itself unconscionable and therefore unenforceable?
- Should the clause be voided due to public policy considerations?
Courts will generally construe exclusion and limitation of liability provisions strictly, and the more serious the breach, the more strictly the courts will interpret a clause that seeks to limit or exclude liability. Public policy will not allow parties to hide behind exclusion or limitation of liability clauses in cases of outright fraud.
In Quebec, it is not possible to exclude liability for misrepresentation. Any stipulation whereby a merchant is liberated from the consequences of their own act or the act of their representative is prohibited (Article 10, CPAQ).
- Does national law impose any general principles of fair commercial practices?
Duty of honesty
Canadian common law does not generally recognise a duty to negotiate in good faith where parties are acting at arm's length in ordinary commercial transactions. Once a contract has been formed however, a general organising principle of good faith has been recognised by the courts. As such, every agreement will contain an implied general duty of honesty in contractual performance. This does not impose a duty of loyalty or a general claim of disclosure, or require a party to forego advantages flowing from the contract; rather, it is a requirement not to lie or mislead the other about matters directly linked to the performance of the contract.
This duty of honesty is an implied term of all contracts and cannot be waived or displaced by an entire agreement clause.
Under Quebec law, contracting parties are required to conduct themselves in good faith both at the time the obligation is created and at the time it is performed or extinguished. During the pre-contract phase, parties must also respect Quebec's general duty of care (Article 1457, Civil Code), which provides that all persons must conduct themselves, according to the circumstances, usage or law, in such a way that does not cause injury to another.
Duress is coercion of the will which vitiates consent. At common law and in equity, duress may provide the basis for
repudiating a contractual consent. The existence of duress is a question of fact.
Typically, the forms of duress which render a contract voidable are more obvious than situations which one might call "bad faith". For example, physical violence or threat thereof, illegal imprisonment, wrongful distraint or threatened seizure of goods, threat of criminal prosecution without legal justification or the institution of civil proceedings with no proper motive may constitute duress.
The concepts of economic duress and commercial pressure are also relevant. The test for these is whether or not there is coercion of will such that there was no true consent. The courts acknowledge that whether or not independent legal advice was obtained will be a relevant consideration in the analysis; however, it is not necessarily "an integral component of the economic duress doctrine" and likely has limited applicability where the parties are commercial entities with ready access to legal counsel.
Undue influence is the ability to dominate another person's will by exercising a pervasive influence on them, whether through manipulation, coercion, or outright or subtle abuse of power. Undue influence is a question of fact in the circumstances, and it is a well-established equitable doctrine that a contract may be set aside due to influence that has affected the sufficiency of a party's consent to the bargain. There appear to be two kinds of cases where courts will grant relief from agreements on the basis of undue influence:
- Cases where the relationship between the parties is recognised as a special relationship, due to the trust and confidence generally reposed in one of the parties. Where these special relationships exist, undue influence is presumed to exist and the transaction will be set aside at the request of the weaker party, unless the presumption is rebutted. A relationship where there is a great disparity in business experience between the parties may fall into this special category.
- Cases where there is no recognised special relationship, but where the weaker party alleges that the stronger party was able to take an unfair advantage of the weaker, either by actual pressure on the party in relation to a transaction, or by the general relationship of trust between the parties. In these cases, undue influence is not presumed to exist and must be proven by the party alleging the same.
Unconscionability is an equitable doctrine which is intended to relieve parties from bargains that are "contrary to good conscience". An unconscionable contract is one where there is inequality in bargaining power arising out of the ignorance, need or distress of the weaker party which is exploited by the stronger party, and where there is substantial unfairness or improvidence in the bargain. Thus, situations that may have given rise to a breach of a duty to negotiate in good faith may also be unconscionable, and may be liable under this doctrine to being set aside.
Most provinces also have consumer protection legislation which protects against unfair practices. Under the Ontario Consumer Protection Act, it is an unfair practice for a person to make a false, misleading or deceptive misrepresentation or an unconscionable representation.
In Ontario, a false, misleading or deceptive representation includes:
- A representation that the goods or services have sponsorship, approval, performance characteristics, accessories, uses, ingredients, benefits or qualities they do not have.
- A representation that the person who is to supply the goods or services has sponsorship, approval, status, affiliation or connection the person does not have.
- A representation that the goods or services are of a particular standard, quality, grade, style or model, if they are not.
- A representation that the goods are new, or unused, if they are not or are reconditioned or reclaimed, but the reasonable use of goods to enable the person to service, prepare, test and deliver the goods does not result in the goods being deemed to be used.
- A representation that the goods have been used to an extent that is materially different from the fact.
- A representation that the goods or services are available for a reason that does not exist.
- A representation that the goods or services have been supplied in accordance with a previous representation, if they have not.
- A representation that the goods or services or any part of them are available or can be delivered or performed when the person making the representation knows or ought to know they are not available or cannot be delivered or performed.
- A representation that the goods or services or any part of them will be available or can be delivered or performed by a specified time when the person making the representation knows or ought to know they will not be available or cannot be delivered or performed by the specified time.
- A representation that a service, part, replacement or repair is needed or advisable, if it is not.
- A representation that a specific price advantage exists, if it does not.
- A representation that misrepresents the authority of a salesperson, representative, employee or agent to negotiate the final terms of the agreement.
- A representation that the transaction involves or does not involve rights, remedies or obligations if the representation is false, misleading or deceptive.
- A representation using exaggeration, innuendo or ambiguity as to a material fact, or failing to state a material fact if such use or failure deceives or tends to deceive.
- A representation that misrepresents the purpose or intent of any solicitation of or any communication with a consumer.
- A representation that misrepresents the purpose of any charge or proposed charge.
- A representation that misrepresents or exaggerates the benefits that are likely to flow to a consumer if the consumer helps a person obtain new or potential customers.
In determining whether a representation is unconscionable, a court may take into account that the person making the representation, or the person's employer or principal knows or ought to know:
- That the consumer is not reasonably able to protect their interests because of disability, ignorance, illiteracy, inability to understand the language of an agreement or similar factors.
- That the price grossly exceeds the price at which similar goods or services are readily available to like consumers.
- That the consumer is unable to receive a substantial benefit from the subject-matter of the representation.
- That there is no reasonable probability of payment of the obligation in full by the consumer.
- That the consumer transaction is excessively one-sided in favour of someone other than the consumer.
- That the terms of the consumer transaction are so adverse to the consumer as to be inequitable.
- That a statement of opinion is misleading and the consumer is likely to rely on it to their detriment.
- That the consumer is being subjected to undue pressure to enter into a consumer transaction.
It is also an unfair practice for a person to use custody or control of a consumer's goods to pressure the consumer into renegotiating the terms of a consumer transaction.
Any agreement entered into by a consumer after or while a person has engaged in an unfair practice may be rescinded by the consumer, and the consumer is entitled to any remedy that is available in law, including damages.
Under Quebec law, in general, contracting parties are required to conduct themselves in good faith both at the time the obligation is created and at the time it is performed or extinguished. During the pre-contract phase, parties must also respect Quebec's general duty of care (Article 1457, Civil Code), which provides that all persons must conduct themselves, according to the circumstances, usage or law, in such a way that does not cause injury to another.
A consumer can void a contract if it disproportionately favours a merchant in a way which is so great as to amount to exploitation of the consumer or where the obligation of the consumer is excessive, harsh or unconscionable (Articles 8 and 9, CPAQ).
Coming into force in July 2019, amendments to the QCPA provide that a consumer who enters into a high-cost credit contract while their debt ratio exceeds the ratio determined by regulation is presumed to have contracted an excessive, harsh or unconscionable obligation within the meaning of section 8 (Article 19, Bill 134).
- Does national law imply any terms into:
- Contracts for the sale of goods to a person dealing as a consumer?
- Contracts for the supply of services to a person dealing as a consumer?
Under provincial commercial legislation, certain conditions and warranties are implied into contracts for the sale of goods. In Ontario, under the Sale of Goods Act, in a contract of sale, unless the circumstances are such as to show a different intention, there is an:
- Implied condition that the seller has a right to sell the goods.
- Implied warranty that the buyer will enjoy quiet possession of the goods.
- Implied warranty that the goods will be free from any charge or encumbrance in favour of a third party.
Where there is a contract for the sale by description, there is an implied condition that the goods will correspond to the description.
There is no implied warranty or condition as to quality or fitness for any particular purposes of goods supplied under a contract of sale, except in the following circumstances:
- Where a buyer makes it known to the seller the particular purpose for which the goods are required, the buyer relies on the seller's skill or judgment, and the goods are of a description that it is in the court of the seller's business to supply, there is an implied condition that the goods will be reasonably fit for such purpose.
- Where goods are bought by description from a seller who deals in goods of that description, there is an implied condition that the goods will be of merchantable quality, but if the buyer has examined the goods, there is no implied condition as regards defects that such examination ought to have revealed.
In the case of a contract for sale by sample, there are implied conditions:
- That the bulk will correspond with the sample in quality.
- That the buyer will have a reasonable opportunity of comparing the bulk with the sample.
- That the goods will be free from any defect rendering them unmerchantable that would not be apparent on reasonable examination of the sample.
Subject to certain exceptions in the context of consumer transactions, any implied term may be negated or varied by express agreement or by the course of dealing between the parties, or by usage, if the usage is such as to bind both parties to the contract.
Under the Ontario Consumer Protection Act, a supplier is deemed to warrant that the services supplied under a consumer agreement are of a reasonably acceptable quality.
The implied conditions and warranties under the Sale of Goods Act are deemed to apply with necessary modifications to goods that are leased or traded, or otherwise supplied, under a consumer agreement.
Any term or acknowledgement, whether part of a consumer agreement or not, that purports to negate or vary an implied condition or warranty under the Sale of Goods Act or any deemed condition or warranty under the Consumer Protection Act is void. A term or acknowledgement that purports to negate or vary an implied condition or warranty under the Sale of Goods Act or any deemed condition or warranty under the Consumer Protection Act is severable and shall not be evidence of circumstances showing an intent that the deemed or implied condition does not apply. However, in a recent decision of the Ontario Court of Appeal (which decision is under appeal), the Court held the consumer protection rules would not apply when a consumer enters into an agreement with an occupier (as defined by the Occupier's Liability Act); provided that the purpose of the agreement is to permit the consumer to use the occupier's premises in return for payment (Schnarr v Blue Mountain Resorts Limited, 2018 ONCA 313). In such a case an occupier may benefit from a waiver of liability signed by the consumer and the Consumer Protection Act will not negate its effect.
In Quebec, legal warranties are implied relating to the transfer of ownership of goods (Article 36, CPAQ) and to conformity to the description of the goods (Article 40, CPAQ). Goods or services must conform to statements or advertisements regarding them made by the merchant or the manufacturer (Article 41, CPAQ). There is also an implied guaranty that the goods are fit for normal purpose and that the goods are durable (Articles 37 and 38, CPAQ). Finally, the CPAQ states that where the goods are of a nature that requires maintenance, replacement parts and repair service must be available for a reasonable time after the making of the contract (Article 39, CPAQ). However the merchant may release themselves from this obligation by warning the consumer in writing, before the contract is entered into, that the merchant does not supply replacement parts or repair service.
- What liability exists for breach of an express term of a contract?
Under Canadian law, a breach of contract may entitle the non-defaulting party to remedies available under the terms of the contract, applicable legislation, and common law and equitable principles. Generally, breach of contract by one party will entitle the other party either to an action for damages, or in some circumstances to equitable remedies, including specific performance or an injunction.
More specifically, the breach of a contractual condition or a breach falling within the purview of the test from Hong Kong Fir Shipping Co. Ltd v Kawaski Kisen Kaisha Ltd,  1 All ER 474, will be considered a repudiatory breach. This type of breach entitles an innocent party to three remedies:
- The right to disaffirm.
The right to disaffirm is a remedy which permits the innocent party affected by a repudiatory breach to either continue its contractual relations with the breaching party or disaffirm the contract, that is, to end its contractual relations with the breaching party. The innocent party need only communicate an intention to disaffirm the contract. Whether the innocent party elects to affirm or disaffirm the contract, they will have a claim in damages for breach of contract, as long as they have incurred a loss. Finally, the remedy of restitution should be seen as an alternative to a claim in damages when the innocent party has chosen to disaffirm the contract. Such a remedy makes the value of benefits conferred on the defaulting party available to the innocent party.
In Quebec, a breach of a consumer contract by a merchant exposes them to recourses under the CPAQ. The consumer may demand nullity of the contract where the rules governing the making of contracts are not observed (Article 271, CPAQ).
Other remedies for violation of the CPAQ are set out in Article 272 of the CPAQ. This type of violation "gives rise to an absolute presumption of prejudice to the consumer" (Richard v. Time Inc.,  1 SCR 265 at para 112). The remedies are:
- The specific performance of the obligation.
- The authorisation to execute it at the merchant's expense.
- The reduction of the obligation.
- That the contract be rescinded.
- That the contract be set aside.
- That the contract be voided.
Articles 271 and 272 of the CPAQ are not cumulative and a consumer cannot use both articles for the same violation.
In addition, the consumer may also claim damages, including punitive damages. When punitive damages are claimed, the following analytical approach applies. The punitive damages must be awarded in accordance with Article 1621 to the Civil Code and must have a preventive objective, that is, to discourage the repetition of undesirable conduct. Having regard to this objective and the objectives of the CPAQ, violations by merchants or manufacturers that are intentional, malicious or vexatious, and conduct in which they display ignorance, carelessness or serious negligence with respect to their obligations and consumers' rights under the CPAQ, may result in awards of punitive damages. However, before awarding such damages, the court must consider the whole of the merchant's conduct at the time of and after the violation (Richard v Time Inc.,  1 SCR 265 at para 180).
Prohibited practices can also be subject to fines (Articles 277-279, CPAQ).
With respect to sequential performance contracts such as mobile phone contracts, the liability for cancellation of a contract by a consumer is set out in Article 214.6 of the CPAQ.
- What liability exists for breach of an implied term of a contract?
The remedy for breach of an implied term is the same as that of an express term (see Question 10).
Control of unfair contract terms
- How does national law regulate the inclusion of unfair terms in a consumer contract?
Generally, provincial consumer protection legislation does not regulate the inclusion of unfair terms in consumer contracts. However, see Question 8 for a list of prohibited unfair practices.
In Quebec, abusive clauses are prohibited (Articles 8-9, CPAQ). The same prohibition is set out in Article 1437 of the Civil Code. The consequence is that an abusive clause in a consumer contract or contract of adhesion is null, or the obligation arising from it may be reduced.
A clause which is excessively and unreasonably detrimental to the consumer or the adhering party and is therefore contrary to the requirements of good faith will be considered abusive. In particular, a clause which so departs from the fundamental obligations arising from the rules normally governing the contract that it changes the nature of the contract is an abusive clause (Article 1437 al. 2, Civil Code).
In Quebec, external clauses in a contract, that is, terms and conditions that are not set out in detail, are valid. In a consumer contract, however, an external clause is null if, at the time of formation of the contract, it was not expressly brought to the attention of the consumer, unless the other party proves that the consumer otherwise knew of it (Article 1435, Civil Code). Article 25.9 of the CPAQ Regulation prohibits any stipulation in a contract that makes an external clause that was not brought to the attention of the consumer binding on a consumer.
- To what extent does national law permit the use of terms that limit or exclude the liabilities to which a party to a consumer contract would otherwise be subject?
The Ontario Consumer Protection Act provides that the substantive and procedural rights it gives to consumers apply despite any agreement or waiver to the contrary.
It also provides that any term or acknowledgement, whether part of the consumer agreement or not, that purports to negate or vary any implied condition or warranty under the Sale of Goods Act or any deemed condition or warranty under the Consumer Protection Act is void.
As set out above, the consumer protection rules will not apply when a consumer enters into an agreement with an occupier (as defined by the Occupier's Liability Act); provided that the purpose of the agreement is to permit the consumer to use the occupier's premises in return for payment (Schnarr v Blue Mountain Resorts Limited, 2018 ONCA 313).
In Quebec, a merchant cannot limit their liability (Article 10, CPAQ). The CPAQ Regulation describes the types of clauses that are prohibited. A stipulation intended to exclude or limit the obligation of a merchant or manufacturer to be bound by a written or verbal statement made by its representative concerning goods or services is prohibited (Article 25.5, CPAQ Regulation).
- How does national law regulate contracts made at a distance (that do not involve face-to-face contact between the buyer and seller)?
Provincial consumer legislation governs remote agreements. In Ontario, the Consumer Protection Act requires a supplier to deliver a copy of the agreement within the prescribed time after the consumer enters into the agreement.
Suppliers are also required to:
- Disclose particular information (such as the name and contact information of the supplier, a fair and accurate description of the goods, and an itemised price list at which the goods and services are proposed to be supplied) before the consumer enters into the remote agreement.
- Include certain information in the remote agreement (including most of the information which was disclosed to the consumer before entering into the remote agreement in addition to the telephone number of the supplier, the address of the premises from which the supplier conducts business and the date the agreement is entered into).
Before a consumer enters into the remote agreement, they must be given an express opportunity to accept or decline the agreement and to correct any errors.
A consumer may cancel the remote agreement within seven days of receiving a copy of the agreement from the supplier if the required disclosures are not made before entering into the contract, and within one year of entering into the contract if the consumer does not receive a copy or the agreement does not contain the prescribed information.
In Quebec, the CPAQ sets out the rules governing distance contracts. In particular, it lists all the information the merchant must disclose to the consumer before a distance contract is concluded (Article 54.4, CPAQ). The merchant also has the obligation to present this information in a comprehensible manner. The distance contract must be in writing and must indicate the following before the contract may enter into force:
- The consumer's name and address.
- The date the contract is entered into.
- The information described in Article 54.4 of the CPAQ.
The merchant must send a copy of the contract to the consumer within 15 days after the contract is entered into, in a manner that ensures that the consumer may easily retain and print the contract (Article 54.7, CPAQ).
- How does national law regulate door-to-door selling?
Under the Consumer Protection Act in Ontario, door-to-door selling is referred to as "direct agreements".
Direct agreements must be in writing, the required disclosures must have been made, and the agreement must contain the required information. Furthermore, all direct agreements with consumers are subject to a cooling-off period, during which the consumer may, without any reason, cancel a direct agreement. Consumers may cancel the agreement up to ten days after the consumer receives a written copy of the agreement. It is important to note that direct agreements relating to furnaces, air conditioners, water heaters, duct cleaning services and other similar goods and services are subject to supplementary regulation. For example, suppliers of these types of goods and services may only attend at a consumer's dwelling if the consumer has initiated contact and specifically requested it. A direct agreement that the parties enter into in contravention of the foregoing, and any agreement that is related to the consumer's obligations under the direct agreement (for example, a guarantee or security given by a guarantor, security given by the consumer or a credit agreement in respect of money to pay for the direct agreement) is void. Further, if such a direct agreement is entered into by the consumer and the supplier, the supplier is required to maintain records for three years from the date of entering into the agreement.
Similar to remote agreements, consumers may cancel a direct agreement within one year after the date of entering into the agreement if the consumer did not receive a copy that meets the statutory requirements.
In Quebec, this concept is referred to as contracts entered into by itinerant merchants. This type of contract must be in writing and must include specified information (Article 58, CPAQ). The contract made between an itinerant merchant and a consumer may be cancelled at the discretion of the consumer within ten days following the day each of the parties is in possession of a duplicate of the contract (Article 59, CPAQ).
- Who is responsible for enforcing consumer protection legislation? What powers do enforcement authorities have?
In Ontario, the Ministry of Government and Consumer Services (the Ministry) or such other member of the Executive Council to whom the administration of the Consumer Protection Act may be assigned (the Minister) has been granted the power to disseminate information for the purpose of educating and advising consumers and the power to enforce the Consumer Protection Act for the purpose of protecting consumers. To enforce the Consumer Protection Act, the Minister may enter into agreements with law enforcement agencies in Canada and other jurisdictions, and in doing so, exchange information concerning breaches or potential breaches of consumer protection legislation. The Minister may delegate their authority.
The Ministry is empowered to receive complaints concerning conduct for the protection of consumers, whether the conduct constitutes an offence or not. The Ministry is also empowered, with respect to certain investigatory powers, to appoint persons responsible for conducting investigations and to make an application to a justice of the peace for a search warrant.
The Director, who is the person designated as the Director under the Ontario Ministry of Consumer and Business Services Act, is granted the right under the Consumer Protection Act to issue various orders, including:
- Compliance orders, directing a person to comply with the Consumer Protection Act.
- Freeze orders in relation to assets or trust funds.
The following penalties apply under the Ontario Consumer Protection Act:
- Individual. A fine of not more than CAD50,000, or imprisonment for a term of not more than two years, less a day, or both.
- Corporation. A fine of not more than CAD250,000.
In addition to any other penalty, the court may order the person convicted to pay compensation or make restitution.
If a fine payable as a result of a conviction for an offence under the Consumer Protection Act is in default for at least 60 days, the Director may disclose to a consumer reporting agency the name of the defaulter, the amount of the fine and the date the fine went into default. The Director also has the power to create a lien against the property of the person who is liable to pay the fine if the fine is in default for at least 60 days.
In Quebec, the Office de la protection du consommateur (OPC) is responsible for enforcing consumer protection legislation. Its powers include issuing fines and the investigation and inspection of merchants. The OPC also has the power to compel a merchant to provide information and to conclude undertakings with merchants that are not compliant with the CPAQ.