Part 4 – Amendments, extensions and the consequences of a breach under the Act
By Robert Kennaley
McLauchlin & Associates
In recent issues of Horticulture Review, we have reviewed some of the obligations placed on those who supply goods or services to consumers in Ontario, pursuant to the new provincial Consumer’s Protection Act. In this issue we will review the Act’s application to amendments, renewals and extensions; and elaborate on the potential consequences of a breach of the Act.
Amendments
The Act deals with amendments in two ways. First, the Act deals with amendments on their own in addressing the problem of unsolicited goods or services. Second, the Act deals with amendments in dealing with renewals and extensions.
Amendments and unsolicited goods or services
In general, the Act provides that if a consumer pays a supplier for unsolicited goods or services, the consumer may demand a refund of the payment for up to a year. With respect to amendments, the Act provides that if there is a material change to the goods or services a consumer is receiving on an ongoing or periodic basis, the goods or services shall be deemed to be unsolicited from the time of the material change forward, unless the supplier is able to establish that the consumer consented to the change. A supplier is allowed to rely on a consumer’s consent that is made orally, in writing or by other affirmative action. The onus, however, is on the supplier to prove the consent in the event of a dispute.
What constitutes a material change will vary in every circumstance. The Act defines such a change as being one “of such nature or quality that it could reasonably be expected to influence a reasonable person’s decision as to whether to enter into the agreement.”
Amendments, renewals and extensions
In general, a consumer agreement may be amended, renewed or extended if:
a) either the supplier or the consumer makes a proposal in that regard;
b) the supplier provides the consumer with an update of all of the information required under the Act for the particular form of agreement; and
c) so long as the party who receives the proposal explicitly (and not merely by implication) agrees to the proposal.
The amendment, renewal or extension is only effective if the supplier provides a written copy of an updated version of the agreement to the consumer within 45 days after it is agreed to.
Future agreements, Internet agreements and remote agreements may also be amended, renewed or extended by an alternative method. (Why the alternative method cannot be used for direct agreements is beyond the comprehension of this writer). The alternative method allows for amendments, renewals or extensions where:
a) the agreement indicates how this is to occur;
b) the supplier gives advance notice of a proposal in that regard; and
c) the supplier gives the consumer the option of either terminating the agreement or retaining it unchanged in response.
The Act provides specific requirements as to what such a proposal should contain and how notice should be given. Those interested in adopting such an alternative method should review the Act and regulations to ensure that these specific requirements are met.
What does this mean for contractors?
The primary lesson to be learned in relation to amendments is that contractors and suppliers should ensure that they obtain written approvals for all changes in the work, at an agreed upon price, from the client. Strictly speaking, the Act appears to require that this be done before the work is commenced. If this is not practical, such a written approval should be obtained as soon as reasonably possible, every time. If clients refuse to sign off on the changes, suppliers should then refuse to perform them.
Once an approval for a change is obtained, (regardless of its scope) the Act appears to suggest that an entire new copy of the agreement needs to be drafted and delivered to the client within 45 days. It is suggested that, depending on the circumstances, this requirement is somewhat nonsensical. That having been said, it is in the Act. A client might refuse to pay for the change if the provision is not complied with. It is suggested that, while not in strict compliance with the legislation, and depending on the scope of the change, contractors and suppliers might want to consider delivering a confirmation of the change and its approval, along with a confirmation that the remaining terms of the agreement remain unaltered. They should understand, however, that they run the risk of non-compliance in that regard.
Renewals and extensions
The new rules applicable to renewals and extensions are particularly significant to maintenance contractors. This is because many maintenance contractors presume that their clients want the agreements to be automatically renewed or extended unless they advise otherwise. Such contractors have thus historically continued to provide services or materials to consumers after an agreed upon term has expired. Unfortunately, it appears that maintenance contractors who do this will have to change their practices.
One option would be for maintenance contractors to ask their clients to enter into longer term contracts so as to avoid the necessity of revisiting the same issues every year. While a price for the term of the agreement would have to be agreed to, the agreement could include provisions for changes in price as required.
For most hard landscape contractors, suppliers and designers, these would not appear to have the same impact. This is because these providers do not generally perform under ‘term’ contracts. Rather, they agree to perform a certain scope of work, often pursuant to a schedule. It is suggested that where a construction contract allows for schedule extensions, it is not necessary for the contractor and the consumer to treat that schedule extension as an “extension” to the contract. This, however, is not made clear in the legislation itself.
The consequences of a breach under the Act
So is all of this writing on the Consumer’s Protection Act much ado about nothing? Isn’t the Act targeted at those who will knowingly attempt to take advantage of vulnerable and unsuspecting consumers? What is the real risk of proceeding as we always have?
As much as it might seem unlikely, the Act grants extensive powers to investigators under the Act to enforce warrants, enter premises and seize items, etc. Orders might be made against suppliers in relation to breaches of the Act. Also, individuals can be prosecuted for breaches of the Act and face penalties of fines of up to $50,000 or imprisonment for up to two-years-less-a-day. Officers and directors of corporations can be fined and sentenced as individuals. Corporations face fines of up to $250,000.
More importantly, perhaps, the new Act alters the playing field for those who contract with consumers in Ontario. First, the Act provides that where a consumer agreement can reasonably be interpreted in more than one way, it is to be interpreted to the benefit of the consumer. This, alone, should encourage contractors, designers and suppliers to take steps to better describe their scope of work and contractual relationships in the agreements they use.
In addition, consumer clients can now take steps to rescind and/or cancel consumer agreements by alleging either unfair practices or that the agreement was not made in accordance with the Act. The consequences of such an action can be severe and extremely problematic. Among other things, the Act provides that:
a) an agreement not made in accordance with the Act is not binding on a consumer;
b) where a consumer cancels an agreement in accordance with the Act, the effect is to cancel the agreement as if it never existed; and that
c) upon cancellation the supplier must refund to the consumer any payments made to date under the agreement.
While the Act does allow a Court to determine that a consumer should nonetheless be bound by part or all of an agreement that did not conform with the Act, no one reading this article wants to forego payment for some long period of time while they pay a lawyer to convince a Court to do so.
In the end, in the face of the new Consumer’s Protection Act, those who supply services or materials to consumers in Ontario really have no choice but to amend their contracts and practices to conform. Unfortunately, while the possibility of a problem arising might appear remote, it might only take a one problem on a large job to cause serious consequences for your business.
