Contracting out of access to justice: enforcement of forum-selection clauses in consumer contracts.
Author | Pavlovic, Marina |
Forum-selection agreements in consumer contracts nominate by default the business's home jurisdiction to resolve disputes and thus directly impact a consumer's ability not only to access courts, but also to obtain access to substantive justice. It has been argued that courts should consider enforcing jurisdiction clauses in consumer contracts with "greater scrutiny" because of their inherent power imbalance. To examine how the courts approach forum-selection clauses in consumer contracts, this article analyzed all reported consumer cases involving forum-selection agreements in Canadian common law jurisdictions between 1995 and 2016. The analysis of these cases shows that the courts have failed to exercise the greater scrutiny that was called for. In light of the analysis of the surveyed cases, this article argues that the rules for enforcing forum-selection clauses in consumer contracts ought to be recalibrated to reflect the power dynamics of consumer relationships, the ubiquity of standard-form contracts, and their effect on consumers' ability to obtain redress. This article proposes two suggestions for reform: legislative intervention to invalidate forum-selection clauses in consumer agreements, and reframing and recalibrating the common law strong-cause test for the enforcement of forum-selection clauses in consumer transactions.
Les accords d'election de for designent la province de rattachement d'une entreprise comme lieu de resolution des differends par defaut et ont donc une incidence directe sur la capacite du consommateur d'acceder non seulement aux tribunaux, mais aussi a la justice substantielle. On a deja souleve que les tribunaux devraient evaluer l'application des clauses d'election de for dans les contrats de consommation de maniere plus minutieuse en raison du desequilibre de pouvoir inherent a celles-ci. Afin de determiner comment les tribunaux abordent les clauses d'election de for dans les contrats de consommation, cet article analyse toutes les decisions publiees en droit de la consommation impliquant des accords d'election de for devant les tribunaux canadiens de common law entre 1995 et 2016. L'analyse des decisions etudiees montre que les tribunaux ont omis d'exercer la minutie requise. A la lumiere de l'analyse des decisions etudiees, cet article soutient que les regles d'application des clauses d'election de for dans les contrats de consommation devraient etre recalibrees afin de refleter la dynamique de pouvoir dans les relations de consommation, l'omnipresence des contrats types, et leurs effets sur la possibilite pour les consommateurs d'obtenir reparation. Cet article propose deux suggestions pour instaurer une reforme : une intervention legislative qui invaliderait les clauses d'election de for dans les contrats de consommation, ou la restructuration du critere de la cause en common law pour l'application des clauses d'election de for aux operations commerciales de consommation.
Introduction I. Rules for the Enforcement of Forum-Selection Clauses II. Survey of Cases A. Validity of Forum-Selection Clauses B. Enforceability of Forum-Selection Clauses: The Applicability of the Strong-Cause Fest in Consumer Cases 1. Businesses' Jurisdictional Interest: Impact on the Defendant of Holding the Trial in the Nominated Jurisdiction 2. Consumers' Jurisdictional Interest: Impact on or Prejudice to tire Plaintiff by Holding the Trial in the Nominated Jurisdiction a. Fair Trial and Enforcement of Judgments b. Cost and Inaccessibility of the Foreign Trial c. Inability of the Nominated Court to Deal with the Claim C. Balancing Competing Jurisdictional Interests D. Why a "Commercial" Strong Cause Does Not Work for Consumers III. Suggestions for Reform A. Legislative Approach 1. Existing legislative Approaches a. Ontario b. Quebec c. European Union 2. Canadian and International Uniform Rules a. Uniform Law Conference of Canada Uniform Consumer Contracts Rules b. International or Regional Conventions 3. Proposal for Common Law Canada B. Re-Imagining the Common Law Strong-Cause Fest Conclusion Introduction
Consumers purchase goods and services from businesses located in Canada and worldwide on a daily basis. They get loans, buy telecommunications services, book travel, sign up for social networking websites, and purchase everything from clothing to computers. Inevitably, some of these relationships will break down and the consumers will seek some form of redress. The Canadian Forum on Civil Justice conducted a national survey exploring the nature and extent of legal problems experienced by Canadians. This survey found that consumer problems are the most frequently experienced legal problem, representing 22.6 per cent of all everyday problems. (1) They are both the most frequently abandoned and the most frequently resolved problems. Consumers largely resolve their legal problems through self-help (2) and rarely resort to the courts. (3) While self-help and effective alternative dispute resolution systems may resolve a substantial number of consumer complaints, a small number of consumer cases will still end up in court, either as individual actions or as class proceedings. The courts are central for securing consumers' access to procedural and substantive justice and upholding consumer protection policies, despite their low engagement in resolving these problems. (4)
Business-to-consumer transactions in a globalized digital economy are governed almost exclusively by non-negotiable standard-form contracts, which are presented to consumers on a take-it-or-leave-it basis by all market players. Put differently, "[i]n the mass market, consumers are contract takers" (5) and their access to and use of goods and services is conditional upon them accepting the terms of the standard-form contracts. The seemingly unlimited choices available to consumers are, in fact, constrained by the often onerous terms of standard-form contracts. These contracts have become "the rule[,] and [the businesses] the rulers." (6) Standard-form contracts contain clauses dealing with substantive rights (such as price, warranties, and the like) and dispute resolution clauses setting out how disputes between the parties will be resolved. Dispute resolution clauses include either an arbitration clause that requires the consumer to engage in binding arbitration (7) or a forum-selection clause that confers jurisdiction on a specific court chosen by the business. (8)
In Canada, arbitration clauses have attracted a significant amount of litigation (9) and academic criticism. (10) In response, Alberta, Ontario, Quebec, and Saskatchewan have enacted consumer protection legislation regulating pre-dispute mandatory arbitration clauses. (11) In contrast, little attention has been given to forum-selection clauses, although they are far more prevalent than arbitration clauses (12) and have an equally or even greater negative impact on a consumer's access to courts. In fact, the public outrage over consumer arbitration (in both Canada and the United States) may have turned the forum-selection clauses into a silent consumer fiend. For example, after considerable public clamour over Facebook's use of a mandatory arbitration clause in its revised terms of use, Facebook changed these terms and substituted its arbitration clause for a forum-selection clause. (13)
The principal policy goal behind the criticism of consumer arbitration and subsequent regulation through the Consumer Protection Act in Ontario was to increase consumers' access to justice by increasing their access to the courts. (14) On the surface, forum-selection clauses appear to meet this objective by ensuring that a court will hear the matter. However, the practical effect is that forum-selection clauses restrict consumers' access to justice, since the business dictates the choice of court (forum). The forum chosen by the business is its own home forum or a forum most favourable to its interests. (15) In a cross-border business-consumer relationship, the chosen forum is a foreign forum for consumers and it may often, although not always, offer lesser substantive protection than a consumer's home forum. On the surface, forum-selection clauses provide predictability, as consumers know ahead of time which forum will resolve the dispute. Yet, they significantly restrict consumers' access to meaningful remedies, since the cost and complexities of pursuing a claim in a foreign forum often outweigh the financial benefits of the claim.
Since the enactment of the Civil Code of Quebec in 1994, Quebec has treated contractual restrictions on consumers' access to justice in cross-border transactions differently than the rest of Canada. Article 3149 provides for the jurisdiction of Quebec courts in consumer transactions where the consumer is a resident of Quebec, and effectively prohibits contractual restrictions on accessing Quebec courts through arbitration or forum-selection clauses. Additionally, section 11.1 of Quebec's Consumer Protection Act prohibits contractual restrictions on consumers' "right to go before a court" and has an impact on the enforcement of arbitration clauses and class action waivers in domestic transactions. (16)
It has been argued that courts should consider enforcing jurisdiction clauses in consumer contracts with "greater scrutiny" because of their inherent power imbalance. To examine how the courts approach forum-selection clauses in consumer contracts, this article analyzes all reported consumer cases involving forum-selection agreements in Canadian common law jurisdictions between 1995 and 2016. The analysis of these cases shows that the courts have failed to exercise the greater scrutiny that had been called for. In light of the analysis of the surveyed cases, this article argues that the rules for enforcing forum-selection clauses in consumer contracts ought to be recalibrated to reflect the power dynamic of consumer-business relationships, the...
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