Cameron Mitchell, Author at

by Cameron Mitchell 2015/03/18

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Further to an earlier post, just eight months after Canada’s Anti-Spam Legislation (“CASL”) came into force on July 1, 2014, the Canadian Radio-television and Tele-Communications Commission (“CRTC”) has issued the first significant Notice of Violation against a Quebec-based company called Compu-Finder. CASL prohibits commercial electronic messages (“CEMs”) sent for the purpose of encouraging commercial activity without the express or implied consent of the recipient. The new legislation also requires inclusion of an ‘unsubscribe’ option on such electronic communication. Under CASL, the CRTC can impose penalties of up to $10 million on corporations and $1 million on individuals for violating the CEM rules.

On March 5, 2015, the CRTC announced that it had issued a Notice of Violation and a penalty of $1.1 million against Compu-Finder for what it called flagrant violations of CASL. The CRTC noted that Compu-Finder failed to comply with CASL by sending out CEMs promoting training courses to businesses without the consent of recipients, and also neglected to include a functioning ‘unsubscribe’ option. The CRTC became aware of Compu-Finder’s actions through the Spam Reporting Centre, where it received a significant number of complaints against Compu-Finder. Compu-Finder has 30 days to submit written representations in its defence to the CRTC. Unless it does so, the company will be found to be in violation of CASL and must pay the fine. The monetary penalty is designed to ensure compliance with CASL, and the CRTC noted that its goal in issuing violations is to encourage companies like Compu-Finder to amend their business practices to comply with the new legislation.

In its announcement, the CRTC also noted that it is in the process of investigating a number of other CASL complaints, indicating that it is taking CASL violations seriously. Whether or not the CRTC continues to issue hefty penalties against offenders, the action against Compu-Finder demonstrates that the new legislation has teeth, and should serve as a warning to businesses that the implications of CASL are not to be underestimated.  If your business has yet to implement the necessary changes in order to ensure its compliance with CASL, you should consider doing so immediately to avoid penalties.

Steps to take include:

  • Ensure that recipients of electronic communications have given their consent. Now that the CASL is in force, businesses that have not sought consent will face added hurdles, as sending electronic correspondence requesting express consent may itself be considered a prohibited CEM. Express consent is not time-limited and therefore continues until it is revoked.
  • Consider whether implied consent has expired. Under CASL, implied consent based on an existing business or non-business relationship with recipients lapses two years after the event that triggered the relationship, such as the purchase of a product. Implied consent also applies to addresses that have been conspicuously published.
  • Keep records of how you have obtained consent. The onus on proving that consent is on the party sending the CEM.
  • Exercise diligence in ensuring that CEMs include the requisite ‘unsubscribe’ option and that it is properly functioning. This appears to be a key factor in the review of a company’s CASL compliance.

This first action taken by the CRTC should send a message to businesses that violators of CASL risk facing considerable consequences. It is in the best interest of businesses to ensure that they have taken the necessary measures to ensure CASL compliance.

If you have any questions regarding CASL or your business’ compliance status, please contact Cameron Mitchell at cmitchell@sorbaralaw.com.
* * This article is intended only to inform and educate. It is not legal advice. Be sure to contact a lawyer to obtain legal advice on any specific matter.

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By Cameron Mitchell and Nigel Smith, Law Student 2014/11/28

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The Supreme Court of Canada released a decision last week that could result in significant changes regarding the way that contractual relationships and business disputes are dealt with by the courts.

You may know that, while commercial parties are free to act in their own best interest, there was a general common-law principle that parties to a contract must act in good faith and carry out their contractual obligations reasonably and according to the contract’s intent or purpose.

In Bhasin v. Hrynew (“Bhasin”), our Supreme Court acknowledged the general ‘organizing principle’ or requirement of good faith in performing contractual obligations and recognized a new duty in addition to the principle of good faith: honesty.  To most businesspeople, it likely seems self-evident that parties to a contract should act honestly when carrying out their respective duties.  So what led the Supreme Court to enshrine this new, higher standard?

Summary of Bhasin

In the Bhasin case, Harish Bhasin (“B”), a retailer of financial savings plans, had been doing business with a wholesaler of savings plans since 1998. At one point, the wholesaler began doing business with another retailer (“C”). At one point, the wholesaler altered the wording of its standard contract, and B executed the new contract. A new renewal clause stated that either party could trigger non-renewal of the contract by giving notice before the expiry of a term. When the wholesaler asked that C audit B’s business, B refused to give C access to his confidential information. C was a competitor and was interested in merging with B’s business. The wholesaler ultimately gave notice to B that it would not be renewing B’s contract. B sued the wholesaler and C claiming that they had conspired against him and that the wholesaler had failed to act in good faith when terminating the standard contract; all of which diminished the value of B’s company.  Although an appeal court ruled that there was no implied duty of good faith in a contract (the standard contract did not contain a ‘good faith’ clause), B was ultimately successful at the Supreme Court.

The key part of the Supreme Court’s ruling is as follows:

“It is appropriate to recognize a new common law duty that applies to all contracts as a manifestation of the general organizing             principle of good faith: a duty of honest performance, which requires the parties to be honest with each other in relation to the           performance of their contractual obligations.

Under this new general duty of honesty in contractual performance, parties must not lie or otherwise knowingly mislead each other about matters directly linked to the performance of the contract.  This does not impose a duty of loyalty or of disclosure or require a party to forego advantages flowing from the contract; it is a simple requirement not to lie or mislead the other party about one’s contractual performance.”

What Does this Mean?

As a result of the Bhasin decision, the duty of honesty in contractual performance is now part of the ‘common law’ – precedents that lower courts are bound to follow, if appropriate based on the facts of a particular case. The Bhasin decision may result in more claims based on one party acting dishonestly being brought forward, and potentially in a variety of different contexts.

As one example, imagine that your business runs out of a key component required in the production of your best-selling product.  Your normal supplier does not have the component in stock and says there is a global shortage of the components.  You approach two other suppliers who tell you they have the components and you choose Supplier A, who offers you the lowest price.  You sign Supplier A’s standard form agreement, and he says that he will deliver the shipment in 10 days.  Five days later, Supplier A calls you and says that he was mistaken and that the components in question were out of stock.  You call Supplier B and find out that they now have no components in stock.  Worse, the next day you learn that your competitor down the street got a big, last minute shipment of components from Supplier A, and apparently at a much higher unit cost than the price set out in your contract with Supplier A.  Your production line is shut down for 2 weeks until your normal supplier is able to provide you with the components.  You could consider suing Supplier A for failing to fulfill the terms of the contract even though there may be a provision in the Supplier A’s standard form of agreement which exonerates Supplier A in such circumstances. Referring to the standard outlined in Bhasin, you could argue that Supplier A breached the duties of good faith and honesty by knowingly misleading you about the status of the components.

Of course, business relationships are just one of many areas where contracts are used.  It will be interesting in the months and years to come to see how the requirement of honest performance from Bhasin is applied in other areas of the law, such as wills and estates, family law (prenuptial or separation agreements) or municipal law.  Depending on how far courts are willing to apply this new requirement of honesty, the ramifications from the Bhasin decision could prove to be profound.

Impacts and What You Need To Do

While the full impact of the Bhasin decision will likely take years to be determined, the old adage about honesty being the best policy applies more now than ever.  Like many of us remind our teenage children: it’s less about what occurred, and a lot more about how you react. In other words, bad things happen sometimes, but did you own up and tell the truth?  In the example above, if Supplier A had honoured the terms of the original contract for the components, he may have received a lower unit price on the transaction, but he would have avoided months if not years of protracted negotiations and litigation that resulted from the lie to the first customer. 

If, as a wise businessperson, you operate your business in an honest and ethical manner, then the Bhasin case will likely not impact the way you do things.  If, however, you ever find yourself in the unpleasant position of being harmed by a dishonest party, then you may have a cause of action against that party, regardless of whether or not the action is permitted under the terms of your contract.

 

Cameron Mitchell is a business lawyer at SorbaraLaw – one of the largest and most respected regional law firms in Ontario – where he specializes in creating and negotiating all kinds of business contracts.  With more than 30 lawyers, several of whom are listed in Best Lawyers in Canada or are Certified Law Society Specialists, SorbaraLaw provides legal services to corporate, governmental and individual clients throughout Ontario.  In addition to corporate law, our lawyer’s specialty areas include employment law and civil litigation, real estate transactions, municipal law and family law.

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Does your business send electronic messages to clients or prospective clients regarding sales, new products, services or general industry updates?  If yes, you should be aware of a new federal Act that comes into force July 1, 2014. Its aim is to protect consumers from unwanted ‘spam’ emails – like the seemingly never-ending stream of Viagra and ‘can’t miss’ stock pick messages.

Canada’s Anti-Spam Legislation (“CASL”) could have a major impact on businesses that send legitimate electronic messages to customers. It is important that companies take some time to review email sending practices and ensure they adhere to the requirements under CASL. Here are some key points to be aware of:

  • The legislation applies to businesses sending ‘commercial electronic messages’ (“CEMs”). A CEM encompasses any form of electronic communication that encourages participation in a commercial activity, regardless of whether there is an expectation of profit. The scope of electronic communication includes e-mails, text messaging, and social media.
  • CEMs must contain an option to unsubscribe, as well as contact information identifying the sender.
  • Recipients (customers) must give their consent to receiving CEMs. Consent to receiving CEMs can be implied or express. One example of implied consent is an existing business or non-business relationship within a prior two-year period. If there is no implied consent, then express consent is required. Because a request (sent electronically) for express consent will be considered a CEM once the legislation takes effect, it is wise to send such requests prior to July 1, 2014.

Exceptions

There are many exceptions to the above requirements. A CEM is not subject to CASL, for instance, if the recipient initiates an inquiry related to a commercial activity, or if the CEM is sent between two employees of an organization. There are also several circumstances where the consent requirement is waived – such as when the message concerns warranty or product recall information on a product or service the recipient has purchased, or when the message is facilitating a commercial transaction the recipient previously agreed to enter into.

There are other various nuances and exemptions under CASL, but the underlying principle is that recipients must provide consent to businesses who wish to send such messages.

Effects

CASL will affect the way in which many business organizations collect and maintain consent when sending marketing e-mails or maintaining e-mail lists. Start-up businesses may be disproportionately affected in their ability to reach new customers. Marketing practices that were valid before CASL may be prohibited after July 1, 2014. For example, if a customer has not purchased anything from your company within two years of the last marketing e-mail you have sent him or her, and hasn’t inquired about your products in the last six months, then your business may no longer have that customer’s implied consent under CASL because it is no longer considered an ‘existing business relationship’.

One particular challenge will be relying on implied consent. If you have no further contact with a client from whom you obtained implied consent prior to July 1, 2014, that implied consent will expire after a three year transition period – namely July 1, 2017. This may be challenging, as express consent will have to be obtained, but sending CEMs to recipients who have not provided consent will not be permitted under CASL.

Practical tips to consider

  • Update your customer records. These records should include when consent was obtained and if it was implied or express. Determine how to collect express consent, and whether you can rely on implied consent or on one of the CASL exemptions. There are email marketing software tools that can aid in tracking customer consent as well as unsubscribe requests.
  • Provide incentives for consent. This can be done by informing recipients of benefits for opting in to the subscription, such as special promotions or exclusive news. This is one possible way to deter potential consumers from clicking the unsubscribe option that senders will be required by CASL to provide.
  • Educate all employees.  As one CEM sent to someone who has not provided consent can be considered a CASL violation, it is essential that all employees understand the basic requirements of, and their obligations under, CASL.

Penalties

An individual may be fined up to $1 million and corporations may be fined up to $10 million for non-compliance with CASL. Consumers and businesses will also have the right to bring a private right of action starting on July 1, 2017, with a penalty of $200 per infraction. Needless to say, the benefits of adjusting your business’ marketing practices to CASL requirements outweigh the costs of remaining idle.

Want to Learn More?

If you have any questions about this article or would like to discuss your company’s CASL compliance strategy, please contact Cameron Mitchell at cmitchell@sorbaralaw.com.

Article Written by:  Cameron Mitchell
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* * This article is intended only to inform or educate. It is not legal advice.  Be sure to contact a lawyer to obtain legal advice on any specific matter.


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