© 2003, Deeth Williams Wall LLP. All Rights Reserved.
(September 25, 2003)
All ten provinces in Canada have active, flourishing companies involved in e-commerce and online business and the provincial and federal laws have been changing at a rapid pace to keep up with the demands of an online economy.
In addition to the usual corporate and tax planning activities that factor into any new venture, companies considering doing business online in Canada should be aware of:
- electronic commerce legislation and requirements for online transactions;
- sale of goods and consumer protection legislation;
- advertising rules;
- language legislation; and
This article will provide a brief point form summary of some of the areas to be considered in order to start a online business in Canada off on the right foot.
In Canada, the courts have held that, generally, online agreements are binding but they have made it clear that they will not enforce an online agreement if it would not otherwise be enforceable – for example, if the terms are unconscionable or contrary to statute.
Under Canadian contract law, an "offer to the world" can be accepted by anyone and the contract initiated on the spot. This can cause problems for an online business if the offer comes from the vendor via the web site, it is accepted by the customer placing an order and then the vendor cannot deliver the products or services for the price offered. When the customer accepts the offer by placing an order, a contract is formed.
- Electronic Commerce Acts
Each of the Canadian provinces has enacted e-commerce legislation. Under this legislation:
- Laws that require documents to be in writing are satisfied if the document is in electronic form. It must be accessible for subsequent reference and capable of being retained by another person.
- An electronic document is not "capable of being retained" if the vendor prevents or hinders the printing or storage of the documents.
- Electronic documents must be provided to the consumer – not merely made available for access on the vendor’s website.
- Any legislative requirements that documents be signed are satisfied by an electronic signature. There are no mandated technical standards.
- Any matter material to the formation of a contract – such as an offer – may be expressed by means of an electronic document or by clicking on an icon.
- A contract may be formed by the interaction of an electronic agent and an individual or by the interaction of electronic agents. However, an electronic transaction is not enforceable if (a) the individual makes a material error; (b) the individual is not given an opportunity to correct the error; (c) on becoming aware of the error, the individual promptly notifies the other person; and (d) the individual, (i) returns or destroys the consideration or deals with the consideration in a reasonable manner, and (ii) does not benefit materially by receiving the consideration.
- Online organisations should make it clear whether the organisation or the customer makes the offer to purchase goods or services online. If the customer makes the offer, there is still an opportunity for the sales organisation to refuse it.
- The language of the offer must be clear and comprehensible.
- All online offers should be subject to specific conditions, for example:
- Prices are subject to change
- Subject to availability
- Available only to residents in Canada.
- Do not allow the customer to place an order or initiate a transaction without an explicit agreement as to contract terms.
- Avoid "browse wrap" contracts that invite the customer to view the terms by linking to a separate page, but that do not require the customer to view them.
- Do not permit the customer to by-pass the contract terms by directly accessing the product or service order form from another page or site.
- The consumer should be required to click on the "I Accept" or "Submit Order" button.
- Make it clear that once the "I Accept" or "Submit Order" button is clicked, the order becomes final and will be processed.
- It is advisable to provide the following statement on the website: "By submitting this order you agree to our terms and conditions."
- To avoid uncertainty, the following statement can be placed on the online order form: "Your order will be confirmed by return email to you when it is received at our web server and accepted by us."
- Give the customer the opportunity to review and correct any information before confirming their order.
- Make scrolling through the terms and conditions mandatory.
- Use clear and bold typeface.
- Ensure that key terms are visible upfront.
- Highlight any important provisions and disclaimers.
- Do not allow modifications or amendments to the agreement.
- Insert a disclaimer of typographical errors, especially with regard to improperly quoted prices.
- State policies with regard to such errors.
- Include forum and choice of governing law provisions.
- If there are regions in which the business is prohibited by law, block user access from that region. Make it a real, technical block.
- Monitor and log users’ choices.
- Keep complete records.
- Sale of Goods Act
In Canada, sales to consumers are governed by the various provincial Sale of Goods Acts ("SGA"’s) and the provincial consumer protection statutes.
The SGA’s apply to all contracts for the sale of goods. Vendors are obligated to pass good title to the goods to the consumer and the consumer has the right to receive the goods free from encumbrances.
Consumer protection legislation has added further warranties, including a warranty that goods purchased by description will correspond with that description and that the goods are new and unused.
- Vendors should make sure the descriptions of their products on their websites accurately represent the goods that are sent to the consumer.
- In an Internet sale, consumers will be purchasing the goods by description and will not have the opportunity to examine the goods prior to purchase and therefore there is an implied condition that the goods are of merchantable quality.
- Goods will not be deemed to have been delivered until the consumer has had a reasonable opportunity to examine them.
- Consumer Protection Laws
Several provinces have already introduced new consumer protection laws to deal with Internet sales agreements and all provinces will be doing the same in the near future. Vendors thinking of doing business online in Canada should take note of the new provisions. It is important to note that the consumer protection provisions cannot be waived by the consumer and are not overridden by a vendor’s warranties, limitations or disclaimers.
Generally, the new consumer protection laws in each province will require online vendors to disclose specific information to consumers in a manner that permits them to retain and print it, and provide consumers with an express opportunity to accept or decline an Internet sales agreement and to correct errors immediately before entering into it. The consumer must be sent a copy of the agreement.
If the vendor does not disclose the information required or provide an opportunity to accept or decline the agreement or correct errors, the consumer will be able cancel an agreement at any time from the date it is entered into until a specified time after receipt of a copy of the agreement.
If the vendor does not provide a copy of the agreement, the consumer will be able to cancel within a specified time after the date the agreement is entered into.
Perhaps more importantly, vendors who are used to requiring submission to compulsary binding arbitration in their standard agreements will be dismayed to discover that some of the new consumer protection legislation will make such arbitration clauses invalid if they prevent the consumer from exercising a right to commence an action under the statute. Similarly, clauses preventing consumers from commencing a class action proceeding will no longer be automatically effective, although there are still arguments available to the vendor at the certification stage.
To avoid potential cancellation of the contract by the consumer, an Internet sales contract must be provided to the consumer and must contain:
- the buyer’s name and address
- the seller’s name, business address, telephone number and fax number
- the date on which and the place at which the parties to the contract entered into it
- a description of the goods or services
- the heading "Buyer’s Right to Cancel" which should not be less than 12 point bold type and a corresponding statement, in not less than 12 point type, that the buyer has the right to cancel the contract
- an itemized list of the portion of the contract price attributable to each of the goods
- the total amount of the contract price
- the terms of payment
- if the contract is an executory contract with respect to goods, the date on which the contract requires the goods to be delivered
- evidence of the signatures of the parties to the contract.
Online marketing campaigns aimed at Canadian consumers must comply with the same legislation that applies to traditional “bricks and mortar” media. In addition to statutes and regulations, guidelines and codes imposed by industry associations must be adhered to.
- The Competition Act
Canada’s primary misleading advertising provisions can be found in the federal Competition Act. In February 2003 the federal Competition Bureau confirmed that the same rules that govern truthfulness in advertising and marketing practices in traditional businesses also apply online.
Under the Competition Act, a statement, warranty or guarantee of the performance, efficacy or length of life of a product that is not based on an adequate and proper test, is prohibited and any representation that is a warranty or guarantee, or promise to replace, maintain or repair an article is prohibited where it is misleading or where there is no reasonable prospect that the warranty guarantee or promise will be carried out.
- Adopt the perspective of the average consumer who is interested in the product or service advertised when assessing the general impression of the representations in advertisements and marketing campaign.
- Do not assume that customers will read the entire website.
- Ensure that information is communicated in a manner that it is noticeable and likely to be read.
- The Federal Trade-marks Act
The federal Trade-marks Act provides additional statutory protection against misleading advertising by prohibiting the use, in association with wares or services, of any description that is false in a material respect and likely to mislead the public as to:
- the character, quality, quantity or composition;
- the geographical origin; or
- the mode of the manufacture, production or performance of the wares or services.
- The Broadcasting Code for Advertising to Children
The Broadcasting Code for Advertising to Children governs the broadcast advertising of goods and services aimed at children. The Code applies throughout Canada, with the exception of Quebec, where advertising to children is prohibited.
In Canada, the packaging and labelling of products is regulated at both the federal and provincial levels.
Federally, labels of pre-packaged products must contain the identity of the pre-packaged product; the product net quantity; and the dealer’s name and principal place of business. All mandatory label information must be in English and French with the exception of the dealer’s name and address. Vendors are also encouraged to present any other product information in English and French as well.
The Province of Quebec has adopted French as its official language under The Charter of the French Language. The Charter requires that, with certain limited exceptions, all inscriptions on a product, on its container or on its wrapping, or on a document or object supplied with it, including the directions for use and the warranty certificates must be in French. The French inscription may be accompanied with translations, but such translations cannot be given greater prominence than the inscription in French. To the extent that business will be carried on in Quebec, the more stringent bilingual labelling requirements of the Charter must be satisfied.
Vendors should consider whether their Canadian website should be translated into French. From a marketing perspective, vendors may appeal to a wider audience if they offer a French version of their website. Websites that are subject to the Quebec Charter must be in French and translations cannot be given greater prominence. Quebec-based businesses that offer products in Quebec must comply with the language legislation. Businesses that have no base of operations in Quebec are not subject to the provisions of the Charter unless their activities have a real and substantial connection with Quebec.
If a vendor, online or otherwise, collects personal information about its customers, the practice must comply with the applicable Canadian privacy legislation governing the private sector. Right now, the primary legislation is the federal Personal Information Protection and Electronic Documents Act, referred to as PIPEDA.
PIPEDA applies to "personal information", which is defined as "information about an identifiable individual, but does not include the name, title or business address of an employee of an organization". Currently, PIPEDA is being implemented under a phased-in approach that will be completed on January 1, 2004. Since January 1, 2001 PIPEDA has applied to personal information collected, used or disclosed by federal undertakings or business and to personal information disclosed across provincial or national borders.
Right now PIPEDA does not apply to most intra-provincial business, but as of January 1, 2004, PIPEDA will apply to the collection, use or disclosure of personal information in the course of any commercial activity even within a province if the province does not, by that time, have its own "substantially similar" provincial privacy legislation. So far, Quebec is the only provincial legislation governing the private sector that has been approved by the federal government as meeting that test.
PIPEDA will continue to apply to personal information in all inter-provincial and international transactions by organisations subject to the legislation.
Every organisation governed by PIPEDA must meet the following principles of the statute, which require that:
- organisations be responsible for personal information under their control and designate an individual to be responsible for compliance;
- the purpose for which the personal information is collected be identified before or at the time of collection;
- consent be obtained for the collection, use and disclosure of personal information;
- information collection be limited to that which is necessary to fulfil the purposes identified;
- personal information not be used or disclosed for purposes other than those for which it was collected;
- personal information be as accurate, complete and up-to-date as possible and that appropriate security safeguards are put in place to protect said information;
- customers and employees be informed of the organisation’s practices relating to the personal information;
- on request, an individual be informed of the existence, use, and disclosure of their personal information and be given access to it; and
- individuals are allowed to challenge the accuracy and completeness of the information.
Individuals can complain to the federal Privacy Commissioner of Canada, who can investigate the complaint and then issue a report to the parties with findings and recommendations. The Commissioner may make public any information about an organisation’s personal information management practices, if he feels that it is in the public interest to do so.
Online vendors and their counsel have a lot to plan for when considering doing business online in Canada. There are many other legal considerations of course, including taxation and corporate compliance matters, along with the myriad of issues that any company needs to consider before it launches a business abroad.
However, with careful planning and some practical considerations as to how they need to set up and conduct business, vendors should find the Canadian online market a good choice.
Contact Amy_Lynne Williams for more information on conducting Online Business in Canada.