Archive for June, 2013

Primer on Contract Interpretation (Part 3)

In two earlier posts (see here and here), we reviewed the Alberta Court of Appeal’s guidelines to assist with basic contract interpretation (in Bhasin v. Hrynew). In this post we wrap up our primer on the Court’s guidelines. According to the Court:

  • Mental suffering is not compensated in contracts law (the only caveat is whether “harsh modes of termination” might trigger damages in the case of an employment contract).
  • What if one of the parties is at a significant disadvantage in bargaining power? Where two parties are negotiating and there is some inequality in “bargaining power, need, or knowledge”, that alone is not enough to justify an amendment to the terms of a contract. However, the court might be willing to step in and amend the terms of a contract in the case of “actual unconscionability”. What does “unconscionable” mean? It depends…. Here’s an example: In the recent case of Maloney v. Dockside Marine Centre Ltd., 2013 BCSC 395, an exclusion clause in a standard purchase-and-sale contract was consider by the court to be “unconscionable” because there was an inequality in the position of the parties, with a sophisticated and experienced vendor versus an unsophisticated purchaser.
  • What if you are negotiating and the other side makes a promise that never makes it into the agreement? There is a concept in contract law called “parol evidence”. This refers to evidence of verbal or extraneous negotiations or agreements between the parties, that might explain, interpret or alter the written terms of a contract. Think of all the discussions and email exchanges that never appear in the final written document … but they might help explain or shed light on certain provisions of the written agreement. The Court has indicated that such evidence should be used very conservatively. An “entire agreement” clause can validly exclude this type of evidence of previous negotiations or promises (assuming there is no actual fraud). In other words, do not rely on this type of evidence to explain the written agreement. If you want a certain term or promise in the agreement, then it should appear in writing.
  • “Courts should be especially wary of altering or interpreting creatively formal contracts carefully negotiated and written, with legal advice”; and finally
  • “Courts should not attempt after the fact to rewrite a contract to accord with what the court now thinks, or one party now believes, is more just or more businesslike, especially in the full light of hindsight.”

Calgary – 07:00 MDT

Primer on Contract Interpretation (Part 2)

As mentioned in Part 1, the Alberta Court of Appeal (in Bhasin v. Hrynew) has provided some helpful guidelines to assist with basic contract interpretation.

If you deal with contracts in your job, then here are some tips to see how the courts will interpret your agreements.

From time to time a question comes up about what terms are “implied” in the written agreement. Yes, the terms appear clear to one side, but the other side argues that certain provisions should be included by implication, even though those terms are not specifically written in the contract. What is the Court’s view on this? To paraphrase from the judgement:

  • Courts are generally against implying terms into a written agreement.
  • Courts can imply terms in contracts only when the new term is: (i) so obvious that it was not even thought necessary to mention, or (ii) truly necessary to make the contract work at all. This is not a question of making the contact “merely reasonable” or “fair” for both sides, but a question of what is completely obvious or absolutely essential for the contract to make sense.
  • Merely foreseeing that something might happen is not enough to justify adding implied terms; both parties “must have intended the term” to be included.
  • A term cannot be implied in a contract which would contradict an express term of that contract. In other words, an implied term cannot be added where it would go against the clear written provisions that the parties agreed to.

More to come.

Calgary – 07:00 MDT

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Terms and Conditions May Apply

capture1.JPGThe criminal defence lawyers have their TV shows and movies. What about those humble lawyers who draft online agreements and terms of use all day long? It’s not every day that this kind of legal fine print gets time on the silver screen. Check out this documentary Terms and Conditions May Apply.

Playing next weekend at the Vancouver International Film Festival and Hot Docs Canadian International Documentary Festival.

Calgary – 07:00 MDT

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Primer on Contract Interpretation (Part 1)

Intellectual property (IP) contracts in Alberta are interpreted just as any contract would be. The same basic rules of interpretation apply, whether it is an IP assignment or transfer, a software license, a complex techology asset acquisition, the hiring of a technology employee or consultant, a non-disclosure agreement or any commercial agreement with an IP element.

The Alberta Court of Appeal in Bhasin v. Hrynew, 2013 ABCA 98, has provided some helpful guidelines to assist with basic contract interpretation. If you deal with contracts in your job, then here are some tips to see how the courts will interpret your agreements:

  • Think there is a duty to perform contractual obligations in “good faith”? Guess again. “There is no duty to perform most contracts in good faith.” The court cited an Ontario decision (Transamerica Life Canada v ING Canada 2003 CanLII 9923 (ON CA) (para 51)) and two Alberta Court of Appeal cases (Mesa Operating Partnership v Amoco Canada Resources (1994) 149 AR 187 (CA) and Klewchuk v Switzer, 2003 ABCA 187 (CanLII)). The courts in these cases found no general duty of “good faith”, and they involved very different types of contract.
  • What about in employment agreements, where (arguably) there is an imbalance of power in favour of the employer? The court said there is a relatively narrow duty of good faith in employment contracts: Employers must not announce or implement termination in a “harsh or demeaning way”. This applies to the method of termination, not the reasons for the termination. Other than that, there is no general duty of good faith in employment contracts. The Court cited two cases which state that employment contracts are not generally contracts of good faith in all respects. (Wallace v United Grain Growers 1997 CanLII 332 (SCC),  and Keays v Honda Canada, 2008 SCC 39 (CanLII).

More to come.

Calgary – 07:00

New Alberta Privacy Decision: Cloud Providers Take Note

Consider this: A service organization we’ll call CloudCo collects and compiles personal information from its corporate customer. The individual whose personal information is being collected has a relationship directly with the corporate customer, but not with CloudCo. The personal information has been shared with CloudCo without the individual’s knowledge or consent. Sound familiar?

Many cloud service providers host personal information without any direct relationship with the individual. Maybe they rely on assurances from their own customer. Or they may simply collect personal information without thinking through the privacy implications. 

This recent decision of the Information & Privacy Commissioner of Alberta (Professional Drivers Bureau of Canada Inc. Case File Number P1884) deals with the collection of personal information of truck drivers by a private service company, called the “Professional Drivers Bureau”. This company collected personal information about drivers from trucking companies, created a database of information, and then offered a search service, by which trucking companies paid a fee for a report on the driver. In that report, the personal information about the driver was disclosed to the trucking company. The personal information was gleaned and compiled into a database over a long period of time, and it became clear during the Commissioner’s investigation that the individuals never consented to this collection, use and disclosure. The Commissioner ultimately decided that the “Professional Drivers Bureau” was in breach of Alberta privacy laws because it never obtained consent directly from the individual truck drivers.

What can other service companies – including cloud service providers – take away from this case?

  • Cloud service providers should consider if they are “collecting” any personal information themselves, or merely providing a service which allows their customer to store information in the cloud. When a service provider collects personal information, it must obtain consent. In this case, the service provider did not provide any notice to the individual of its collection of her personal information, did not indicate its purposes, did not provide the name of someone who could answer her questions. It apparently did not inform the trucking companies about its purposes in collecting the personal information. All of this was in contravention of privacy laws.
  • If a service provider is merely providing space on a server, the terms of service should address privacy issues, and make it clear that no personal information is collected, used or disclosed by the cloud provider. 
  • Termination issues should also be addressed in the agreement. What happens to that data when the service relationship ends?
  • Consider the position of the trucking company: in this case, the trucking company shared personal information about individuals with the “Bureau”. When personal information is disclosed in such a way, the trucking company should be asking: Was this disclosure authorized by the individual? What is the purpose of the disclosure? What contractual restrictions are placed on the recipient, to ensure that the personal information is used in accordance with the consent from the individual. In the cloud context, this means contractual terms that directly address the privacy issues.
  • Get privacy advice when entering into cloud-based service agreements.

Calgary – 11:00 MDT

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Software Licenses and Indemnities

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License agreements often contain indemnities. An indemnity is a contractual obligation to step in and reimburse some financial obligation such as a liability, loss, or damage. In essence, the party giving the indemnity will make the injured party “whole” by recompensing losses and expenses.

The court in Coastal Contacts Inc. v. Elastic Path Software Inc., 2013 BCSC 133 reviewed the meaning and scope of an indemnity for intellectual property infringement, which is a common clause in many intellectual property (IP) license agreements. This is what’s known as an IP indemnity clause. What obligations does a software vendor take on, when they give an IP indemnity? For the full article, click here: Software Licenses and Indemnities: What Obligations Are You Taking On?

Calgary – 11:00

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