One of the emerging trends in Canadian workplaces is the increasing number of flexible working arrangements. The rise of online services, and gig-economy apps like Uber and Doordash, has afforded many Canadians the ability to set their own hours. These work arrangements occur through independent contracting agreements that are either national or international in scope. For example, an Ontario corporation could enter into an exclusive distributor agreement with a British Columbia resident while an Alberta resident could enter into a service agreement with a California tech company.
These inter-provincial and international arrangements create their own unique legal challenges, especially since Canada’s constitution provides for provincial jurisdiction over property and civil rights. The words “property and civil rights” effectively embrace all private law transactions, including almost all commercial transactions. Accordingly, Canadian provinces are governed by their own civil legal systems. Although these legal systems may overlap significantly, they are still very much their own “beasts.”
Choice of Law
Unsurprisingly, one of the main issues arising from inter-provincial and international contracts is the “choice of law” or “proper law” clause. This clause is a term of a contract in which the parties specify that any dispute arising under the contract shall be determined in accordance with the law of a particular jurisdiction. Where a particular jurisdiction is selected, courts will uphold such express intentions of the parties. The complexities arise when the parties have not made provision for the jurisdiction that will govern a dispute. Here, courts can infer the jurisdiction from the terms and nature of the contract and the surrounding circumstances.
If the contract is silent on the intention of the parties as to the applicable law, and the applicable law cannot be inferred from the terms of the contract in light of the surrounding circumstances, the intention of the parties can be inferred by referring to the province/state with which the contract has its closest and most real connection. Courts will consider the contract as a whole in light of all the circumstances which surround it, such as: a) the place the contract was performed; b) the place where the persons performing the contract reside; c) the nature and subject matter of the contract; and d) the place the contract was formed.[1]
Historically, courts paid the most attention to where the contract was formed. This factor is no longer determinative.[2] Courts have begun to emphasize the jurisdiction where the contract was performed as being one of the most important factors. This is because the place of performance of the contract is related to the contract’s subject matter.
Snap-On Tools of Canada Ltd. v. Korosec,[3] is one such case embodying this new legal paradigm. Mr. Korosec was an individual dealer of professional work tools provided by Snap-On, based in Ontario. The parties entered into a sales representative agreement, which did not include a choice of law clause. In determining that the proper law of the contract was British Columbia law, the Court cited the fact that Mr. Korosec resided in British Columbia at all material times, the contract was performed in British Columbia, and Snap-On had a branch office in the province. Similarly, in Bagg v. Bucyrus-Erie Co. of Canada,[4] though the contract was accepted in British Columbia, the trial judge held that the law of the state of Wisconsin should apply since performance of the Plaintiff’s employment was mostly in that jurisdiction.
With the rise of the “gig economy” and remote working arrangements, look for choice of law clauses to become increasingly important in managing disputes between people and businesses who operate out of different jurisdictions.
[1] Lilydale Cooperative Ltd. v. Meyn Canada Inc., 2015 ONCA 281
[2] Herman v. Alberta (Public Trustee), 2002 ABQB 255; Bagg v. Bucyrus-Erie Co. of Canada, 1990 CarswellBC 1285; Sennett v. Tape Estate, 1986 CarswellSask 356.
[3] 2002 BCSC 1844
[4] 1990 CarswellBC 1285