Click “I Agree” for Ontario Consumer Protection

There is no dispute that, over the last few years, e-commerce has become an integral part of overall consumer activity in Canada. In fact, according to Statistics Canada, Canadian consumers spent an estimated $3 billion in 2003 purchasing goods over the Internet – a 25% increase in spending over 2002. This increase in sales over the Internet, however, has created a number of unique legal issues. One of these issues is the protection of consumer interests in the context of an on-line contract.

Under the existing Consumer Protection Act (the “current Act”), consumers are granted certain protective rights in relation to contracts where the delivery of goods, the performance of services or payment in full for those goods or services is not made at the time that the contract is entered into. These types of contracts are defined as “executory contracts.” Most prominent among the protective rights granted to consumers in relation to executory contracts is the right of rescission in certain circumstances.

Most on-line contracts would normally meet the criteria of an executory contract, as in many cases, goods and services purchased on-line are not delivered, or provided, at the time that the contract is entered into. The problem, however, is that the language used in the current Act was not written with on-line contracts in mind and does not easily adapt to the reality of the Internet.

To address this issue, the Ontario Legislature has included specific provisions in the new Consumer Protection Act, 2002 (the “new Act”) and its corresponding regulations which are designed to address on-line contracts where the value of the goods or services purchased exceeds $50. The new Act will take effect July 30th of this year.

Under the Consumer Protection Act, 2002, a new species of Internet Agreement will be created within the consumer protection regime, which is specifically defined as a “consumer agreement formed by text-based Internet communications.” In practice, this refers to the common “click-wrap” or “click-to-agree” type of agreement whereby execution is carried out by the click of a mouse. The new Act will prescribe a number of additional rights and obligations that reflect the nature of on-line transactions.

With respect to disclosure, the new Act will require that before a consumer enters into an Internet Agreement, the supplier (i.e., the seller) must disclose the following information to the consumer:

1. The name of the supplier and, if different, the name under which the supplier carries on business;
2. The telephone number of the supplier, the address of the premises from which the supplier conducts business and information respecting other ways, if any, in which the supplier can be contacted by the consumer, such as the fax number and e-mail address of the supplier;
3.  A fair and accurate description of the goods and services proposed to be supplied to the consumer, including the technical requirements, if any, related to the use of the goods or services;
4. An itemized list of the prices at which the goods and services are proposed to be supplied to the consumer, including taxes and shipping charges;
5. A description of each additional charge that applies or may apply, such as customs duties or brokerage fees, and the amount of the charge if the supplier can reasonably determine it;
6. The total amount that the supplier knows would be payable by the consumer under the agreement, including amounts that are required to be disclosed under paragraph 5, or, if the goods and services are proposed to be supplied during an indefinite period, the amount and frequency of periodic payments;
7. The terms and methods of payment;
8. As applicable, the date or dates on which delivery, commencement of performance, ongoing performance and completion of performance would occur;
9. For goods and services that would be delivered:                                                                                       i.  the place to which they would be delivered, and                                                                                     ii.  if the supplier holds out a specific manner of delivery and intends to charge the consumer for delivery, the manner in which the goods and services would be delivered, including the name of the carrier, if any, and the method of transportation that would be used;
10. For services that would be performed, the place where they would be performed, the person for whom they would be performed, the supplier’s method of performing them and, if the supplier holds out that a specific person other than the supplier would perform any of the services on the supplier’s behalf, the name of that person;
11. The rights, if any, that the supplier agrees the consumer will have in addition to the rights under the Act and the obligations, if any, by which the supplier agrees to be bound in addition to the obligations under the Act, in relation to cancellations, returns, exchanges and refunds;
12. If the agreement is to include a trade-in arrangement, a description of the trade-in arrangement and the amount of the trade-in allowance;
13. The currency in which amounts are expressed, if it is not Canadian currency; and
14. Any other restrictions, limitations and conditions that would be imposed by the supplier.

The new Act will also require that the supplier deliver a copy of the Internet Agreement to the consumer within 15 days after the consumer enters into the contract, and the agreement must include the information required to be disclosed, as described above, as well as the consumer’s name and the date upon which the agreement was entered into. In terms of delivery, the written copy of the Internet Agreement may be transmitted to the consumer by way of e-mail, by fax, by regular mail or by any other manner that allows the supplier to prove that the consumer received it. The new Consumer Protection Act, 2002 will also require that the supplier provide the consumer with an express opportunity to accept or decline the agreement and to correct errors immediately before entering into it.

In terms of rescission, the new Act will allow a consumer to cancel an Internet Agreement at any time from the date the agreement is entered into until seven days after the consumer receives a copy of the agreement if: (a) the supplier did not disclose the prescribed information to the consumer, or (b) the supplier did not provide to the consumer an express opportunity to accept or decline the agreement or to correct errors immediately before entering into it. Further, the new Act will allow a consumer to cancel an Internet Agreement within 30 days after the date the agreement is entered into if the supplier does not provide the consumer with a copy of the agreement in writing as required.

Given the extent of the new obligations to be imposed upon Internet suppliers, and the expanded rights of Internet consumers, it may be worthwhile for Internet suppliers to review their current on-line contractual regime in order to determine any necessary revisions in advance of the new Consumer Protection Act, 2002 coming into force.

This article appeared in inBrief Summer 2005.  To subscribe to this publication, visit our Publications Request page.