Supreme Court Rules on the Enforceability of Consumer Arbitration Clauses
By: Christine Yick
On March 18, 2011, the Supreme Court of Canada released its long-awaited decision in Seidel v. Telus Communications Inc. ("Telus"), clarifying the state of the law regarding arbitration clauses and whether they act as a bar to class action proceedings in contracts of adhesion, being contracts presented without any ability to negotiate their terms. Standard form franchise agreements are generally viewed as contracts of adhesion.
In Telus, the plaintiff (Seidel) entered into Telus' standard form cell phone contract which purported to waive the consumer's right to bring any court proceeding, including class actions. Seidel complained that Telus falsely represented how it calculated air time for billing purposes and sought relief under British Columbia's Business Practices and Consumer Protection Act ("BPCPA") which contained specific language invaliding arbitration clauses that restrict a consumer's right to bring an action to enforce consumer protection standards. In a narrow 5 to 4 ruling, the Supreme Court of Canada found that such legislation was enforceable to invalidate an arbitration or waiver of class action clause in contracts of adhesion.
In reaching its decision, the Court stated that where legislation exists that provides a specific right of access to the court, an arbitration clause will not act as a bar to a class action. It further stated that the courts will give effect to commercial contracts that are freely entered into, even a contract of adhesion. Accordingly, absent a legislative prohibition, arbitration clauses remain prima facie enforceable.
In view of this decision, franchisors should consider whether it is advisable to include an arbitration clause in their franchise agreements.
Canadian Franchise Association Appoints Peter Snell to its Board of Directors
Congratulations to Peter Snell who was appointed the Chair of the Canadian Franchise Association's Legal and Legislative Affairs Committee and to the Board of Directors of the CFA.
The Canadian Franchise Association was founded in 1967 by a small group of franchisors who recognized the need for a national organization committed to the growth, enhancement and development of franchising across the country. Over 40 years later the CFA – a not-for-profit national trade association – represents almost 500 franchise systems and the professionals who support the industry.
As the National Voice for Canadian Franchising the CFA promotes excellence in franchising and works with all levels of government to ensure the development of industry-made solutions. Recognized as a leading national trade association in the field, the CFA educated Canadians about franchising, specific franchise opportunities and proper due diligence through its many events, programs and publications.
Who, What, Where and When
- Kudos to Len Polsky, Peter Snell and Debi Sutin who are all listed in Who's Who Legal: Canada 2010 for Franchise Law.
- Len Polsky, Jeff Hoffman, Peter Snell and Debi Sutin will be attending the International Franchise Association Legal Symposium May 14-17, 2011 in Washington, DC. Peter Snell and Debi Sutin will serve as Roundtable Facilitators at the Legal Symposium. Debi's roundtable is on "Structuring Franchise Transfers and Re-Sale" and Peter's is on "Social Networking Sites – Protecting the Franchisor's Trade-mark and System".
- Peter Snell and Len Polsky will be attending the International Bar Association Legal Conference in Washington, DC on May 18, 2011. Peter Snell will be speaking and providing a legal update on franchising in Canada as part of the "News From Around the World" session.
- Len Polsky will be attending a meeting of the Executive of the International Franchise Committee of the International Bar Association while in Washington, DC.
- Peter Snell, as Chair of the Canadian Franchise Association Legal & Legislative Affairs Committee will be presenting an update on franchise law in Canada at the International Franchise Association's Legal & Legislative Affairs Committee meeting in Washington, DC on May 14, 2011.
- Peter Snell's article on "Understanding the Disclosure Document" will be published in the next edition of the Franchise Entrepreneur.
- Len Polsky's article "A New Word on Trade-Mark Use in Canada for Services" will be published in the next edition of the Franchise & Distribution Journal.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.