By Rob Kennaley
McLauchlin & Associates
Ontario’s new Consumer Protection Act came into force on July 30, 2005 and appears destined to have a significant impact on those who provide goods or services to consumers in the province. Landscape Ontario members who work in the residential sector or in retail should take steps to understand the new obligations and adjust their practices to efficiently meet them.
For the purposes of the Act, a “consumer” includes any individual acting for personal, family or household purposes, but does not include a person who is acting for business purposes. Accordingly, agreements to provide goods or services in the industrial, commercial or institutional sectors are exempt. (Certain persons and professionals are also expressly exempt, including most architects, engineers, accountants, teachers, doctors, lawyers and surveyors).
Unfair practices
Among other things, the Act prohibits unfair practices involving false, misleading or deceptive representations. The Act expressly provides that any consumer agreement which has been entered into after the supplier has engaged in an unfair practice may be rescinded by the consumer. A consumer has one full year from the agreement to give notice of his or her intention to rescind because of an unfair practice.
The Act provides examples of unfair practices. Most of the examples offer no surprises, as they relate to conduct that clearly amounts to at least border-line fraud. Other examples, however, are not so simple. This is particularly true in relation to representations made in good faith that might nonetheless turn out to be inaccurate.
On the one hand, it is an unfair practice for a supplier to make a representation that “goods or services will be available or can be delivered or performed by a specified time, when the person making the representation knows or ought to know otherwise.” The Act, however, suggests that other types of representations which turn out to be inaccurate will give rise to an unfair practice regardless of what the supplier knew or ought to have known in making them. In this regard, it is an unfair practice to represent:
a) that goods or services have performancecharacteristics, uses, benefits or qualitiesthey do not in fact have; or
b) a specific price advantage exists, if it does not.
Accordingly, affected members should be careful not to make representations about possible price advantages or performance characteristics, etc., unless they are absolutely sure that they are accurate. If in doubt, the representations should be qualified so the client understands that there is no guarantee associated with the representation.
Ambiguity in representations and consumer agreements
The Act also suggests that it is an unfair practice to make material representations which are either ambiguous or fail to state a material fact, if they “deceive or tend to deceive.” It is difficult to ascertain what representations fit this category. As a result, contractors and suppliers must take care to avoid ambiguity in making representations about what is to be provided in a consumer agreement. A good approach is to take care to ensure that consumer agreements accurately reflect the work or services that are to be performed.
Also of note, the Act provides that any ambiguities in a consumer agreement will be interpreted in favour of the consumer, regardless of who drafted the document. This overrides well established case-law, which holds that in such circumstances the document should be interpreted against the person who wrote it. This, again, should encourage members to take extra care in ensuring that their contracts accurately describe, in as much detail as is reasonably possible, what the client is getting for his or her money.
Members should also be aware of this issue when faced with a homeowner client who insists on marking up or drafting the form of contract to be used: if the client’s language can reasonably be interepreted in more than one way, the Act provides that the benefit of the doubt will nonetheless go to the client.
Estimates
The Act provides that where a consumer agreement includes an estimate, the supplier’s price cannot ultimately exceed it by more than 10 per cent. These provisions are likely to create some confusion. There are some in the media, for example, who have reported that consumers will now be protected from cost-overruns on home renovation projects. This would appear to be incorrect.
If we adopt the plain meaning of the word ‘estimate’ (as the Act does not provide a definition), it becomes clear that an ‘estimate’ should be distinguished from a ‘fixed price’. In this context, a contractor or supplier provides an ‘estimate’ where he or she says “I think I can do the work for about this price, but I will not be able to tell you the final price until I perform all or some of the work, which you will have to pay for.” On the other hand, a ‘fixed price’ is given where the contractor or supplier says “I will perform this work for this price.” Period
If a mechanic gives you a $200 estimate, repairs your car, and then charges $1,500 when you return, he has given you an estimate and the 10 per cent rule applies. The fixed price approach is where the mechanic says “I will charge you a fixed price of $39.99 to diagnose what is wrong with your car. We will then tell you what you need and give you a fixed price for that work. If you agree, we will then do that work for that price. In the latter circumstance, the client always knows what he is paying. There is no ‘estimate’; there are only fixed prices.
The Act recognizes that fixed-price contracts must be subject to change “if the consumer requires additional or different goods or services.” For example, if you contract to provide hard landscaping services, your contract should properly state that the costs associated with unforseen subsurface conditions are not covered by the agreement. If that is the case, “additional goods or services” will be “required” where such unforseen conditions are encountered. Confusion, however, can arise where the approval or price for the change is not agreed to by the consumer before the work is performed.
All contractors and suppliers must thus take care to ensure that consumer agreements are fixed price contracts and not estimates. As has always been the case, they should also take care to detail what is, and is not, covered by the fixed price. They should also obtain written approval for changes, for an agreed upon price, before changes are performed.
Time and material or unit price contracts should pose no problem as long as no estimate of the total price is provided. If a consumer requires such an estimate, the contractor or supplier must accept that he or she will not be allowed to overrun the estimate by more than 10 per cent and leave enough room in his estimate to cover himself or, alternatively, refuse the work. He or she might also explain to the customer why the estimate has to be high. Designers who tie their compensation to a percentage of the cost of the work should be careful to reference the actual finished cost, without reference to a construction budget, so as to avoid confusion and disputes.
Specific types of consumer agreements
The Act also imposes specific obligations in relation to various types of consumer agreements. For example, those who provide services to consumers under vehicle repair, credit or leasing agreements are now subject to significant new obligations. The Act also breaks consumer agreements down into a number of further categories, some of which will apply to most LO members. In relation to each category the Act imposes specific obligations on suppliers which are sometimes onerous and often broadly described. Readers should be prepared to be frustrated in that regard.
These categories of agreement include “direct agreements”, “future performance agreements”, “remote agreements”, “internet agreements”, “personal development agreements” and “time-share agreements”. We will briefly review some of these categories to provide an indication of the obligations imposed and the issues LO members might be faced with.
A “direct agreement” is a consumer agreement that is negotiated or concluded in person at a place other than at the supplier’s place of business, a market place, an auction, a trade fair, an agricultural fair or an exhibition. An agreement negotiated or concluded at a homeowner client’s residence is thus an example of a direct agreement. A “future performance agreement” is a consumer agreement where delivery, performance or payment in full is not made when the parties enter the agreement. Most construction, maintenance and supply agreements with homeowners are, accordingly, future performance agreements. A “remote agreement” is a consumer agreement entered into when the consumer and supplier are not present together. These would include consumer agreements concluded over the phone.
The Act recognizes that one agreement can fall into several different categories and attempts to resolve that situation by, in circumstances of overlap, specifying which set of provisions will apply. For example, certain of the provisions relating to future performance agreements do not apply if it is also a direct agreement. As a result, and again by way of example, different rules will apply to a future services consumer agreement (be it for construction, maintenance or supply) if it is negotiated or concluded at the supplier’s, as opposed to the client’s, premises.
We will use the future performance agreement as an example of the types of obligations imposed by the Act and the issues which can arise. With respect to a future performance agree ment worth more than $50.00, the Act requires that the agreement be in writing and include 16 different items, ranging from basic information to somewhat complicated requirements. These include a “fair and accurate description of the goods and services to be supplied” including “technical requirements,” “the amount and frequency of periodic payments,” “the date or dates on which delivery, commencement of performance, ongoing performance and completion of performance are to occur” (as applicable), the supplier’s “method of performing” the services, the name of any person the supplier “holds out” as one who will perform services on the supplier’s behalf and “any other restrictions, limitations and conditions that are imposed by the supplier.”
The Act requires that every future performance agreement be in writing, meet the specified requirements and be delivered to the consumer. The Act further provides that a consumer may cancel a future performance agreement within one year after the date of entering into the agreement if the consumer does not receive a copy of the agreement meeting the specified requirements. Also, a consumer may cancel a future performance agreement at any
time before delivery or commencement of performance under the agreement if the supplier has not done so within 30 days after the date specified or agreed to. The Act does not appear to deal with delays beyond the supplier’s control, such as weather. Suppliers are also required to provide the consumer of a future performance agreement with “an express opportunity to accept or decline the agreement and to correct errors immediately before entering into it.”
The specified requirements relating to “direct agreements” appear to include many, but not all, of the requirements referenced in relation to “future performance agreements.” A further different set of rules applies in relation to the other types of agreements. It is also not possible to generally recommend that contractors or suppliers amend their practices to fall into one of the various categories. Each situation is different and each affected contractor or supplier will have to make that determination based on his or her own set of circumstances.
Unfortunately, there is not enough room in this space to address and compare the various types of consumer agreements or the various ways in which the new Consumer Protection Act might force LO members in the residential and retail sectors to restructure their contracts and client relationships. It is clear, however, that each such supplier must take steps to review contracts and practices in conjunction with the new legislation and seek advice in that regard over any concerns. The Act, the Consumer Protection Act, 2002, and the regulation passed thereunder, Ont. Reg. 17/05, can be downloaded from the Ontario Government at www.e-laws.gov.on.ca. In addition, further articles on the Act will be offered in future issues of Horticulture Review and we will be speaking to the issues at the forthcoming LO Congress Conference session on January 11, 2006.
