Consumer Protection Changes on the Way

On July 30, 2005 major changes to Ontario’s consumer protection regime will come into effect. The Consumer Protection Act, 2002 (CPA) applies to all consumer transactions where the consumer or the supplier is located in Ontario when the transaction takes place. It will therefore also be of interest to suppliers located outside of Ontario who enter into transactions with Ontario residents.

Certain provisions under the CPA are of general application. For example, any term contained in a consumer agreement which mandates that disputes be submitted to arbitration or which prohibits class actions will not be enforceable. Consumers are also given an explicit right to cancel a future performance agreement if delivery or commencement of performance does not occur within 30 days of the specified date for such delivery or commencement of performance, or within 30 days after the agreement is entered into if no such date is specified.

The CPA also extends the application of implied warranties and conditions under the Sale of Goods Act to goods that are “leased or traded or otherwise supplied under a consumer agreement”. As well, the CPA imposes a new implied warranty that services must be of a “reasonably acceptable quality.” These implied warranties and conditions are applicable notwithstanding any term to the contrary in the agreement.

Among the many new requirements and amendments introduced in the CPA, the Act contains specific obligations and rights applicable to Internet agreements. These are defined as a consumer agreement formed by text-based Internet communications.

Under the proposed legislation, prior to a consumer entering into an Internet agreement, the supplier will be required to disclose certain prescribed information to the consumer, provide the consumer with an express opportunity to accept or decline the agreement and to correct errors. Information required to be disclosed by a supplier under the proposed legislation would have to be “clear, comprehensible and prominent”.

The information that must be disclosed by the supplier before the consumer enters into an Internet agreement includes the name and contact information for the supplier, fair and accurate description of the goods and services, terms and methods of payment, each charge that a consumer may be expected to pay, delivery or performance dates and locations, and any other restrictions, limitations or conditions what would be imposed by the supplier. Depending on how “imposed by the supplier” is interpreted, this may require disclosure of the terms of any shrink-wrap or similar agreement that is included with the goods (for example, software). The disclosure must be accessible and be available in a manner that ensures that the consumer has accessed the information and is able to retain and print the information.

In addition to the foregoing information, the written copy of the Internet agreement that the supplier must provide to the consumer must also include the name of the consumer and the date on which the agreement is entered into. Such copy must be delivered within 15 days after the consumer enters into the agreement. Delivery can be effected by email, fax or physical delivery. The CPA provides consumers with an explicit right to cancel an Internet agreement which does not contain the required disclosures or which is not delivered.

Most Internet transactions which are conducted today utilize standard form terms and conditions. However, a number of the new disclosure requirements include elements that are specific to the particular transaction. As well, most e-commerce systems utilized today do not include a process to deliver a written copy of the agreement to the consumer. Consequently, most suppliers will likely need to implement major changes to their current e-commerce infrastructure in order to comply with the new CPA requirements.

The CPA also imposes significant requirements in respect of amendments and renewals. Consumers must be given advance notice of any proposal to amend or renew an Internet agreement and any amendment may not affect rights or obligations acquired prior to the effective date. Unless the agreement contains a provision that addresses amendments and renewals, any amendment or renewal proposed by a supplier requires explicit consent from the consumer in order to be accepted. Although though explicit consent to an amendment or renewal is not required where an Internet agreement contains a provision which addresses such circumstances, the consumer must be given prior notice (between 30 and 90 days) in a way that is likely to come to his or her attention and such notice must specify a means for the consumer to respond to the notice that would not involve any cost for the consumer and which must be easy for the consumer to use.

Any amendment or renewal must contain an update of all information that was required to be set out in agreement when it was first entered into and which reflects the effect of the proposal to amend or renew. Any purported amendment or renewal that does not comply with the above is not effective. In order to avoid the additional burdens created by these new requirements regarding renewals or extensions, suppliers may want to consider utilizing agreements which do not specify a term, but which allow for early termination by either party.

Note: The above appeared as a Bits & Bytes article published by Law Times on June 13, 2005.