CCCA Spring Conference 2011: Negotiating Major Business Agreements

CCCA Spring Conference 2011Negotiating Major Business AgreementsPresented by: Stephen Lloyd 1

Dealing with “applicable laws” that are foreign to you:“L’expérience et le jugement ne connaissent pas de frontières” [“Experience and judgement know no borders”] – La Presse ‐ 30 mars 2011 ‐ Un vrai avocat planétaire. 2

Dealing with “applicable laws” that are foreign to you:• Goodfellow Inc. v. Woodys Hardwood Flooring Ltd. 2003 ABQB 162 – Peterson signed a guarantee in favour of Goodfellow, an Ontario corporation, guaranteeing the debts of his company Woody’s Flooring Ltd. Unfortunately for Goodfellow, the guarantee was not executed in accordance with the Alberta Guarantees Acknowledgement Act and was unenforceable. – “…Goodfellow decided to conduct business in Alberta with Woodys and attempted to secure payment of outstanding and future receivables without the benefit of legal advice. It did so at its own risk.” (para 30) – “…Anyone with knowledge of the Act could simply have looked at the document and immediately determined that it would not be enforceable in Alberta. Any major corporation conducting business in Alberta and taking personal guarantees from individuals in this province would be aware of the provisions of the Act or, alternatively, could easily obtain legal advice regarding the requirements of guarantees in Alberta.” (para 32) 3

Representations made in parallel with the formal contract process• Calvin Forest Products v. Tembec Inc., [2006] O.J. No. 1190 – Tembec entered into annual harvesting contracts with Calvin, a tree harvester, throughout the 1990s. In parallel, employees of Tembec encouraged Calvin to mechanize its operations, with loans and through other representations. Ultimately, the overall health of the forest products industry collapsed and Calvin’s mechanization spelled financial disaster. Calvin claimed negligent misrepresentation, and won $3M in damages at the Court of Appeal. – Amongst other evidence in support of its claim of negligent misrepresentation, • “…Whalley, [a witness for Calvin,] testified that, during his encounter with Bruemmer in 1997, Bruemmer reassured him that Tembec would take care of its main contractors. Whalley also testified that, in deciding to purchase a particular piece of machinery, he took into consideration reassurances by Tembec that there would be decent cut blocks and prices, and that business would continue on as it had in the past.” (para 15) • “Perry [a witness for Calvin,] testified that Tembec wanted to have their contractors start a mechanized operation. He testified that Tembec representatives assured contractors that if they committed to mechanizing, they could depend on Tembec for a long‐term commitment.” (para 15) 4

Inserting some common sense into indemnity provisionsEach party shall be liable for all costs, damages, losses and expenses of any nature whatsoever, that the other party, its directors, officers, employees and agents, or any of them, may sustain, or incur, which result from the acts or omissions of a party, its employees or agents in performance of this Agreement or from any breach of the provisions.Each party shall indemnify and save the other party, its directors, officers, employees and agents harmless from and against all manner of actions, proceedings, claims and demands, which may rise or may be brought against the other party, its directors, officers, employees, agents or any of them, in connection with this Agreement and which result from the acts or omissions or both of any of a party, its employees or agents or a party’s subcontractors, their employees or agents. 5

Inserting some common sense into indemnity provisionsSupplier shall indemnify, defend and hold the Indemnified Parties harmless from any and all losses arising from or in connection with death or bodily injury caused by the tortiousconduct of Supplier; loss or damage to tangible property for which Supplier is legally liable or responsible; and Suppliers breach of its obligations under this Agreement. 6

Inserting some common sense into indemnity provisionsAcceptance. Acceptance criteria for Products shall be as mutually agreed by the parties as set out in Attachment A. Upon completion of such testing, Mega‐Multinational Inc. (“MMI”) shall issue to Supplier a notice of acceptance or rejection of the Products. In the event of rejection, MMI shall provide a reason for rejection to Supplier in reasonable detail. Supplier shall use all reasonable efforts to correct any deficiencies or non‐conformities and resubmit the rejected items as promptly as possible but no longer than thirty (30) days after Supplier’s receipt of MMI’s rejection notice. In the event MMI does not accept such corrected Products, MMI may, in its sole discretion and in addition to any other available remedies, either (a) grant Supplier a further fifteen (15) days (or such longer period as MMI may, in its sole discretion, decide) in which to correct any problems in such Products; or (b) deem Supplier’s failure to provide to MMI an acceptable Product to be a default, and immediately terminate this Agreement without further opportunity to cure. 7

Inserting some common sense into indemnity provisionsIn the event that Supplier breaches any representations or warranties hereunder or fails to comply with any term or requirement of this Agreement, including but not limited to timely deliver of Deliverables, MMI may in addition to any other remedies, at its sole option and without any liability to Supplier: (a) terminate or cancel this Agreement in its entirety or as it relates to any specific Products, Services or Deliverables; (b) reject the Deliverables, in whole or in part; (c) withhold any payments due Supplier; (d) recover actual damages, including without limitation lost profits, costs to cover, and reasonable attorney’s fees; (e) request Supplier to deliver conforming Product within no longer than twenty (20) days or alternatively, refund to MMI the fees paid for such nonconforming Deliverables; and/or (f) offset any amounts due Supplier by actual loss(es) incurred by MMI. Remedies set out in this Section are not exclusive. 8

Language issues in Quebec• Contracts that must be drawn up in French: – Consumer contracts, in the absence of express agreement to the contrary. – Commercial contracts pre‐determined by one party and contracts containing standard clauses, in the absence of express agreement to the contrary. – Contracts with governmental authorities, unless these are entered into outside of the territory of Quebec.• Laws to consider: – The Charter of the French language – The Civil Code of Quebec – The Quebec Consumer Protection Act 9

Language issues in Quebec• The Charter of the French language – Section 55. Contracts pre‐determined by one party, contracts containing printed standard clauses, and the related documents, must be drawn up in French. They may be drawn up in another language as well at the express wish of the parties.• “Express wish” – Include the “express wish” within the body of the contract. A sentence at the end may not suffice, even if written in French. – Beachcomber Hot Tubs inc. v. Benoît Lapointe (CQ, 2004): “This sentence is not binding on anyone because it is not part of the text of the contract, being located at the bottom of the page, below a text that is itself below the signatures of the parties. The defendant has not committed himself.” [our translation]. 10

Language issues in Quebec• Contracts of adhesion in the Civil Code of Quebec 1379. A contract of adhesion is a contract in which the essential stipulations were imposed or drawn up by one of the parties, on his behalf or upon his instructions, and were not negotiable. Any contract that is not a contract of adhesion is a contract by mutual agreement. 1436. In a consumer contract or a contract of adhesion, a clause which is illegible or incomprehensible to a reasonable person is null if the consumer or the adhering party suffers injury therefrom, unless the other party proves that an adequate explanation of the nature and scope of the clause was given to the consumer or adhering party. 11

Language issues in Quebec• What happens if your consumer contract or your contract of adhesion is in English, and the parties didn’t expressly agree not to sign it in French?• It may be unenforceable, especially if: – the adhering party demonstrates that he did not understand the contract (because he cannot speak or read English) – the adhering party requested, and was refused, a copy of the contract in French – the contract or document in question was not explained to the adhering party 12

Any questions?Stephen Lloydstephen.lloyd@fmc‐law.com514‐878‐5831

The preceding presentation contains examples of the kinds of issues companies looking to negotiate major business agreementscould face. If you are faced with one of these issues, please retain professional assistance as each situation is unique.

CCCA Spring Conference 2011: Negotiating Major Business Agreements

by FMC Law on Apr 20, 2011

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CCCA Spring Conference 2011: Negotiating Major Business Agreements — Presentation Transcript