Frustration & Force Majeure – Two Ways to Get Out of a Contract

Frustration & Force Majeure – Two Ways to Get Out of a Contract

With the recent instability brought on by the coronavirus, I’ve received several calls asking whether a contract can be cancelled. In this post, I look at 2 ways in which you might be able to cancel or get out of a contract: the doctrine of frustration and the force majeure clause.

 

Frustration

In law, frustration of a contract occurs when “a situation has arisen for which the parties made no provision in the contract and performance of the contract becomes ‘a thing radically different from that which was undertaken by the contract’.” Where external circumstances have changed the context of the contract, courts may not require the performance of the contract. For example, if a landlord agrees to rent out a house to a tenant, and it burns down in the meantime, the rental contract will likely not be enforceable because it is frustrated.

Of course, there is a limitation: you can’t cause an event and then rely on it to terminate a contract. Using our earlier example, if the landlord sets fire to the house, he can’t say that the contract is not enforceable. While the tenant will likely not want to rent out a burnt down house, the tenant might be entitled to damages from the landlord.

Where the frustration of a contract occurs, the parties should be placed in the same position they were in before the contract was agreed to. This may require the refund of deposits, exchange of documents and other acts to be performed.

But what about costs incurred by a party in anticipation of the completion of a contract? If the contract itself does not provide who is responsible, legislation like the Frustrated Contracts Act might provide clarity. This Act allows parties to ask a court to determine what reasonable overhead costs are and who should pay them. It also allows courts to determine who non-monetary benefits should be returned.

 

Force Majeure

Another way of getting out of a contract is by relying on a force majeure clause written into the contract.

Force majeure is a French term meaning “superior force”. It is a clause in a contract Which “generally operates to discharge a contracting party when a supervening, sometimes supernatural, event, beyond the control of either party, makes performance impossible. The common thread is that of the unexpected, something beyond reasonable human foresight and skill.”

Like the doctrine of Frustration, the force majeure clause cannot be relied upon if one of the parties caused the peril.

Whether force majeure will apply will depend on what the contracting parties considered to be a force majeure event. Not all serious events will qualify as a force majeure event. The key consideration is whether the event makes performance impossible. Not if it makes performance unprofitable.

A force majeure clause may look like this: “Neither party shall be liable to the other in respect of a failure by that party to comply with this obligations under this Agreement to the extent that the failure in question is attributable to any circumstance or cause beyond the reasonable control of that party.”

Or like this: “Party A shall not be liable for any damage, cost or loss of profit of Party B arising from a failure by Party A to comply with its obligations under this Agreement, where that failure is attributable to fire, flood, storm, strike, riot, any terrorist act, any act of war (whether or not declared), or of any government or other similar entity exercising de facto sovereignty for the time being in any relevant jurisdiction, including any embargo or restriction upon shipping or transport.”

Unlike the doctrine of Frustration, there is no automatic right at common law or by legislation for a party to claim force majeure. Force majeure can only be used to get out of a contract if it is explicitly included in the contract.

In summary, someone relying on a force majeure clause will have to prove that:

  1. the event falls within the type of cancelling event spelled out in the force majeure clause;
  2. the events were beyond his or her control; and
  3. that there were no measures that he or she could have undertaken to prevent or avoid the event or its consequences.

Conclusion

Claiming frustration and force majeure are only 2 ways of getting out of a contract. There are many more. However, it’s worthwhile considering which events would or would not prevent the performance of a contract, and to plan around them.

Need to get out of a contract or enforce one? Looking to make your next contract as strong as possible to prevent someone from cancelling it? Contact me today for a free initial telephone consultation – (289) 291 7655.

Wojtis Law - Business & Employment Law

Electronic Claims Filing in Ontario: A (Small) Step Forward

Electronic Claims Filing in Ontario: A (Small) Step Forward

The Ontario Ministry of the Attorney General (“MAG”) recently announced that it is expanding its online electronic claims filing civil system in civil matters.  Following a trial run in some jurisdictions in Ontario over the past summer, it has been expanded to all jurisdictions in Ontario.  Litigants can now begin the litigation process by starting a claim online.

Litigants can enter claim information, and upload the following documents:

  1. Statement of Claim
  2. Notice of Action
  3. Affidavit of Litigation Guardian of a Plaintiff under a Disability
  4. Request for Bilingual Proceedings
  5. Consent to File Documents in French.

Litigants can pay the associated fees required to have their claims issued.  However, those seeking a fee waiver must still attend at Court to apply for it.

All other parts in a case must be completed outside of the online system.  All other documents must still be served and filed in accordance with the Rules of Civil Procedure.

This compliments other modernization efforts by the Ministry of the Attorney General, including filing claims in the Small Claims Court (maximum $25,000.00 jurisdiction), and e-mail service and establishment of case websites in Commercial List matters.

The MAG’s announcement states that the service will be expanded in the future to allow for the filing of other documents.  I look forward to that as a litigator.

Hope for a Brighter Future

In my opinion, this advancement is positive but does not go far enough.  It brings the system out of horse and buggy days into the 1990’s.  To really modernize the system, the MAG should give litigants the option to scan and upload all documents used in a case.  That includes family law cases.

Litigants should be able to upload .pdf versions of documents to a central court database.  Parties, Judges and court staff could then view these documents.  Parties can be granted access by a secure web portal.  Login information can be made available to only those named in the lawsuit.  Recipients could be notified of a new document by way of an e-mail.  They can then securely view the document through the court’s web portal.

Some of the benefits would include:

  • Uniformity of documents. This system would ensure each party has the same copy of any document. No more differing versions of documents with missing pages, blurred photocopies, or pages out of order.
  • Easy verification of service. An electronic record would be kept showing when a file was uploaded, viewed by someone, notification was sent and received, etc.
  • Environmental benefits from forgoing paper print outs and travel to court.
  • Financial efficiencies in avoiding excess trips to court.

Security Concern

One concern raised in the past has been security of data. Putting data online enables data miners can glean personal data and use it for commercial or nefarious purposes.  In my opinion, this is a red herring.  For one, unless a court record is sealed, it is already public.  Lawyers, researchers, and journalists regularly view files.  Second, access should only be granted through a secure website, to which only the parties, their lawyers, and court staff have access.  If its possible for nearly every other aspect of modern life (filing taxes, banking, social interaction, etc.), why not court?

Pie in the sky?

Not really.  The court already has an electronic filing system.  The general public can attend at any courthouse to view the status of a matter on a court computer.  They can also look at documents (assuming the file isn’t sealed) by getting in line and asking a clerk to view the file.

Commercially available web portal systems already exist within the legal sector.  They allow multiple parties to login, upload, and view documents.  For example, I use Clio as matter management software, and enable clients to view certain files by logging in to the web portal.

We just need a link between these kinds of services.

If you would like to know more about have been served with a claim or are considering suing someone in a business or employment dispute, please contact me for a free initial consultation.

Disclaimer: None of the foregoing should be considered legal advice.  I am not sponsored by Clio.  If you would like legal advice on anything in this post, contact me at Wojtis Law here.

Wojtis Law - Business & Employment Law

Changes Are Coming to Employment Law in Ontario: Part 3 – Leave of Absence

Changes Are Coming to Employment Law in Ontario: Part 3

In my last two blog posts I commented on some of the changes coming to employment law in Ontario. The bill has now passed third reading, and is waiting for Royal Assent. Essentially, this is a formality and we should consider the law as passed. This final post looks at some of the expansion of leave of absence policies. Employers should review their workplace policies and be ready to implement the required changes. I would be happy to assist you in reviewing your workplace policies. Please contact me for a free initial consultation.

Among the many changes are:

Death of a Child Leave & Crime-Related Child Disappearance Leave.

The law now allows a 104 week unpaid leave if an employee’s child passes away. Previously a 52 week unpaid leave was available, and only if a child died a crime-related death.

The other change expands an employee’s right to take an unpaid leave from 52 weeks to 104 week if their child disappears for criminal-related reasons.

Both of these apply once an employee has been employed for at least 6 months. An employee does not qualify if he/she is charged with a crime in relation to the child’s death or disappearance. These amendments seem sensible in light of tragic circumstances. While an employer may be somewhat inconvenienced by having to maintain or create a position for an employee coming back from a 2 year leave, I would be hard pressed to find an employer who would be so inconsiderate as to balk at reinstating such an employee, especially a long term one (at least 6 months). This kind of leave does not seem to apply to cases where children are taken away by the other parent in a custody/access dispute.

Family Medical Leave.

An employee can take a leave of absence if a family member is seriously ill and a physician thinks that they are at serious risk of dying. There are two expansions to this type of leave.

  • The new law expands the maximum length of the leave from 8 weeks to 28 weeks.
  • It expands the list of eligible family members from spouse, parent, and child to include:
  1. The employee’s spouse.
  2. A parent, step-parent or foster parent of the employee or the employee’s spouse.
  3. A child, step-child or foster child of the employee or the employee’s spouse.
  4. A child who is under legal guardianship of the employee or the employee’s spouse.
  5. A brother, step-brother, sister or step-sister of the employee.
  6. A grandparent, step-grandparent, grandchild or step-grandchild of the employee or the employee’s spouse.
  7. A brother-in-law, step-brother-in-law, sister-in-law or step-sister-in-law of the employee.
  8. A son-in-law or daughter-in-law of the employee or the employee’s spouse.
  9. An uncle or aunt of the employee or the employee’s spouse.
  10. A nephew or niece of the employee or the employee’s spouse.
  11. The spouse of the employee’s grandchild, uncle, aunt, nephew or niece.
  12. A person who considers the employee to be like a family member, provided the prescribed conditions, if any, are met.

This kind of expansion recognizes that often one’s true family is not necessarily the immediate nuclear family. Its interesting that there is no minimum employment tenure requirement. However, as it is an unpaid leave, its unlikely to be abused.

Critical Illness Leave.

This allows an employee to take a leave of up to 37 weeks to care for a critically ill child where there is an injury or an onset of an illness. It is now expanded to apply to the same adults covered by family medical leave, although in those cases, the length of the leave is 17 weeks. Also an unpaid leave.

Parental Leave.

This applies to employees who experience the birth of a child. It is expanded from 35 weeks if the employee also took pregnancy leave to 61 weeks. Also expanded from 37 weeks if the employee did not take pregnancy leave to 63 weeks. These remain unpaid leaves. That being said, Employment Insurance provides compensation if that employee has worked the requisite number of hours before the leave.

Domestic or Sexual Violence Leave.

This is a new type of leave where an employee can take this type of leave if the employee or their child suffers, or is threatened with, domestic or sexual violence. An employee is eligible if they have worked for an employer for at least 13 weeks They can take up to 10 days and 15 weeks for the following reasons:

  1. To seek medical attention for the employee or the child of the employee in respect of a physical or psychological injury or disability caused by the domestic or sexual violence.
  2. To obtain services from a victim services organization for the employee or the child of the employee.
  3. To obtain psychological or other professional counselling for the employee or the child of the employee.
  4. To relocate temporarily or permanently.
  5. To seek legal or law enforcement assistance, including preparing for or participating in any civil or criminal legal proceeding related to or resulting from the domestic or sexual violence.

The first 5 days of this kind of leave are paid. I understand the need for the leave, but not why the first 5 days should be paid. In my opinion, the financial burden should be born by the person causing or threatening the violence, not the employer. At the very least, there should be a method for the employer to recover such amounts from the perpetrator, perhaps from victim surcharge penalties which are routinely charged in criminal matters.

Paid Emergency Leave.

This is now available to all employees, and not just those working in places where there are 50+ employees. Employees continue to be entitled to 10 such days per year, however, the first 2 days are now paid. Employers can ask for evidence supporting the reason for the emergency leave. However, they can’t ask for a doctor’s note. Essentially, an employee only needs to say that they’re sick, and they are entitled to 2 free days of pay. This is ripe for abuse.

The rate of pay is the employee’s typical rate of pay, and is not bumped up by overtime pay, shift premium pay, or holiday premium pay. If the employee is on commission, the pay is what the employee earns on average (or minimum wage, whichever is higher). I take issue with this because the whole point of having an employee paid on commission is that both the employer and employee only get paid if the employee sells. This amendment recreates the employer/employee relationship for those 2 days, unfairly in my opinion.

You can view the Ministry of Labour’s press release from May 30, 2017 here, although it is a bit dated as there have been subsequent debates which have lead to amendments. If you’re into that sort of thing, you can find the amendments here.

Disclaimer: None of the foregoing should be considered legal advice. If you would like legal advice on anything in this post, contact me here.

Changes Coming to Employment Law in Ontario: Part 2 - Is your Business Ready?

Changes Are Coming to Employment Law in Ontario: Part 2 – Is Your Business Ready?

Changes Are Coming to Employment Law in Ontario: Part 2 – Is Your Business Ready?

In my last blog post I commented on some of the changes coming to employment law in Ontario.  The bill has passed 2nd reading and is well on its way to becoming law.  This post looks at some of the other proposed changes.  Employers should review their policies and be ready to implement the required changes.  For assistance in reviewing your workplace policies, please contact me for a free initial consultation.

The proposed changes include:

Expanded employee rights surrounding scheduling.

The proposed amendments limit employers’ powers to call in shift workers on short notice, for short shifts and have employees ‘on call’ without paying them.  For example:

  • Employees who usually work more than 3 hours per day must get paid for at least 3 hours if their shift is cut short.
  • Employees can refuse to take shifts on less than 4 days’ notice without repercussion.
  • If a shift is cancelled within 48 hours of its start, employees must get paid for at least 3 hours.
  • Employees who are ‘on call’ but are not called in to work would be entitled to 3 hours of pay for every 24 hour ‘on call’ period.

These changes eliminate some of the loopholes where employers did not have to compensate employees for wasted time.  In some industries it is common practice not to pay employees if they are ‘on call’ but not called in.  This leaves employees waiting around, forgoing plans on the off chance that they may be called in to work.  The flip side of this arrangement was that these kinds of positions usually demanded a higher salary.  This compensates them  for the possibility of being called in.  With that bargaining chip now off the table, it will be interesting to see whether wages for these kinds of employees fall as a result.

 

Penalties for misclassifying employees as independent contractors.

Some employers retain workers as independent contractors as opposed to employees for the tax savings and limited employment standards benefits.  The new rules penalize employers in new ways for improperly classifying a worker as an independent contractor.  For example, public prosecution, publication on a ‘wall of shame’, and increased monetary penalties.

In my experience, the Ministry of Labour has a very expansive view of who is an employee and a narrow view of who is an independent contractor.  In many cases, employers have been hit with retroactive obligations to pay contributions when an independent contractor suddenly complains that they should have employee benefits.  These expanded penalties will likely drive employers to hire people as employees rather than independent contractors.  Bad news for independent contractors who are typically paid more and are able to write off more expenses.  Good news for government coffers.

 

Recognition of electronic agreements.

Currently, the Employment Standards Act, 2000 usually requires any agreements between employer and employee to be in writing.  This not only includes the employment agreement itself, but agreements to work overtime, extra shifts, take on new kinds of work, etc.  The proposed amendment seeks to clarify that an electronic agreement qualifies.  This brings the law into the 21st century and is a positive.

As there are many changes proposed, I am splitting this post into several parts.  You can look out for other parts of this series on the News & Insights part of the page.

You can view the Ministry of Labour’s press release from May 30, 2017 here, although it is a bit dated as there have been subsequent debates which have lead to amendments.  If you’re into that sort of thing, you can find the amendments here.

Disclaimer: None of the foregoing should be considered legal advice.  If you would like legal advice on anything in this post, contact me here.

Employment Law

Changes Are Coming to Employment Law in Ontario: Part 1 – Is Your Business Ready?

Changes Are Coming to Employment Law in Ontario: Part 1 – Is Your Business Ready?

On May 30, 2017, the Ontario government announced that it will make some major changes to the Employment Standards Act, 2000 (the “ESA”), the Labour Relations Act, 1995, and a number of other laws governing employment in Ontario.

Some of the proposed changes announced are:

Raising the minimum wage.

The proposed law would see minimums rise as follows:

  • The general minimum wage will be progressively raised from the current $11.40/hour to $11.60/hour between October 1, 2017 – December 31, 2017, to $14.00/hour in 2018, and $15.00/hour in 2019.
  • Similar increases would apply for students, liquor servers, hunting and fishing guides, and homeworkers.

This is perhaps one of the most hotly debated amendments to the law, as many businesses may have difficulty paying workers more.  Several small business owners I’ve spoken to say that this will reduce plans to hire workers for entry-level jobs.  Time will tell.

Equal pay for casual, part-time, temporary & seasonal employees.

This would permit these types of employees to challenge their level of pay so that it is equal to pay received by full-time employees performing the same job at the same place of work.  A non full-time employee would have the right to seek additional pay by making a complaint to the Ministry of Labour.

 However, there are carve-outs, most notably where the comparable full-time employee is paid more based on a seniority system, merit system, productivity system or any other fact (other than sex or employment status).

 I foresee employers establishing such carve-out systems now to mitigate some of their exposure in the future.  Here’s some additional food for thought: if employers can pay a different rate on the basis of any other factor (aside from sex and employment status), does this whole amendment have any teeth?  Can an employer pay an employee more because they drive a blue car instead of a red car?

What about other areas of discrimination found in the Human Rights Code  besides sex, such as race, ancestry, place of origin, etc?  Maybe the language should be shored up.

Stiffer penalties for non-compliance and greater enforcement measures.

The proposed changes grant the Ministry of Labour expanded enforcement option where employers breach ESA standards, including greater monetary penalties, creating a Ministry of Labour ‘wall of shame’ for businesses issued a penalty, charging interest on penalties, and greater collection powers.  Maria Luisa Vitti has an interesting article on a recent case where the Ministry of Labour charged a business (and its owners) with provincial offences for unpaid fines, and a summary of how these powers will be expanded in the future.

For employers, this should serve as a cautionary tale: if you oppose Ministry of Labour findings, challenge them in the proper venue, don’t ignore them.  For employees who have difficulty collecting from recalcitrant employers, this is a good signal that collections will be yet faster and more successful in the future.

As there are many changes proposed, I am splitting this post into several parts.  You can look out for the next parts on the News & Insights part of this page.

You can view the Ministry of Labour’s press release from May 30, 2017 here, although it is a bit dated as there have been subsequent debates which have lead to amendments.  If you’re into that sort of thing, you can find the amendments here.

Disclaimer: None of the foregoing should be considered legal advice.  If you would like legal advice on anything in this post, contact me here.