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Its A Clause! But Not Carved In Stone!!


As per wikipedia, a forum selection/jurisdiction clause in a contract with a conflict of laws element allows the parties to agree that any disputes relating to that contract will be resolved in a specific forum. They usually operate in conjunction with a choice of law clause which determines the proper law of the relevant contract.


A typical example of a forum selection clause in a contract is as follows:


Any litigation based hereon, or arising out of, under, or in connection with this Agreement, shall be brought and maintained exclusively in courts located in the province of Ontario.


These jurisdiction clauses are generally enforceable in most cases. However, the court, using its discretionary powers, may decline enforcing a valid jurisdiction clause, depending upon the circumstances of a case.


In Douez v. Facebook, Inc., 2017, the Supreme Court of Canada stated:


Forum selection clauses serve a valuable purpose and are commonly used and regularly enforced. However, forum selection clauses divert public adjudication of matters out of the provinces, and court adjudication in each province is a public good. Because forum selection clauses encroach on the public sphere of adjudication, Canadian courts do not simply enforce them like any other clause.


In Schuppener v. Pioneer Steel Manufacturers Limited, 2019, the Supreme Court of British Columbia discussed the enforceability of a forum selection clause in a contract of purchase and sale.


The facts of the case are as under:


Background

Plaintiff

A resident of British Columbia acquired a prefabricated outbuilding for the storage of his travel trailer and other items from the defendant.


Defendant

Pioneer Steel is an Ontario-based company with a registered office in Mississauga, Ontario, that provided the prefabricated outbuilding through its distributor/sales agent, Pioneer Sales Steel Depot Inc. (“Pioneer Sales”).


Contract

Plaintiff entered into a written contract with Pioneer Sales. The second and final iteration signed by the plaintiff was NOT signed by the defendant. The preamble and the forum selection clause read as follows, in fine print, above the signature line:


The Buyer acknowledges and agrees…; The parties agree that this contract and any dispute, cause of action, and any and all claims, whatsoever (hereinafter “Claims”) with respect to the supply of the steel building shall be interpreted in accordance with the laws of Ontario, Canada. Any claims with respect to the supply of the steel building shall be resolved in the city of Mississauga, Province of Ontario. Any proceedings, which may be commenced pursuant to the Claims, shall be commenced in the City of Brampton, Province of Ontario, Canada;….


The last sentence in the fine print paragraph stated that the buyer “[has] received and read the terms and conditions on the back of this document and agree[s] to be bound by the terms and conditions”.


Though the plaintiff signed the contract, the “terms and conditions” were not signed or initialed by the plaintiff at any point in time.


Incident

Shortly after erection, the structure collapsed injuring the plaintiff.


Allegations

Plaintiff claimed in negligence and breach of contract, alleging design and quality defects.


Position of the Parties (with respect to the Forum Selection Clause)

Plaintiff

Case should be allowed to be litigated in the province of British Columbia, thus declining the enforceability of the forum selection clause. The plaintiff argues that “the forum selection clause does not apply and is otherwise invalid for various reasons, and alternatively that even if the clause is valid and applicable, the Court should exercise its discretion against enforcing it”.


Defendant

The defendant applies for a stay or transfer of the proceedings to Ontario, relying on a forum selection clause.


The Test

Stage 1

The Defendant to establish the “validity, clarity and enforceability” of the Forum Selection Clause in the contract. The court dismissed the plaintiff’s argument that “the final iteration of the contract was not a completed contract because it was not signed by anyone on behalf of Pioneer Sales as the seller”. The court stated:


Certainly the presence of a signature on a written contract can provide compelling evidence of a contracting party’s intent. However, there is no requirement at law that a written contract be signed to make it enforceable.


Various other unsuccessful arguments were raised by the plaintiff (such signing a contract does not mean the plaintiff read the fine print, doctrine of unconscionability alleging contract was not fair, etc.).


The court concluded that the forum selection clause in the written contract applies to the case at bar.


Stage 2

The plaintiff to establish “strong reasons” why the court should use its discretionary powers in declining the enforceability of a valid and unambiguous forum selection clause. This test involves taking into consideration “all the circumstances” including the “convenience of the parties, fairness between the parties, and the interests of justice”.


The following considerations were taken into account:


1. Convenience of the Parties in litigating the matter in either British Columbia or Ontario – Evidence and witnesses are all present in British Columbia.


2. Bargaining Power of the parties – The plaintiff was not given an opportunity or had no ability to negotiate on the applicability or terms of the “Forum Selection Clause”.


3. Public Policy – Products being sold by the defendant in British Columbia are not suitable for the climate in British Columbia and thus, public has an interest in seeing these issues litigate in British Columbia.


4. Interest of Justice – The plaintiff could be subjected to considerable financial burden if the case is litigated in Ontario, and there are no reasons to believe that the respective governing law in both the provinces concerning issues of contract and negligence differ significantly.


Conclusion

The court concluded in favor of the plaintiff, dismissing the defendant’s application to stay or transfer the proceedings to Ontario.


Takeaways

Just because a valid and enforceable jurisdiction clause exists in a contract, does not mean it is carved in stone and cannot be argued. Especially with consumer products, “all circumstances” of the incident need to be considered.

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