GOVERNING LAW DEPENDS ON ‘REAL CONNECTION’ TO JURISDICTION IF THE CONTRACT DOES NOT CONTAIN A CHOICE OF LAW CLAUSE
New Holland (Canada) Credit Company v. MacPherson 2003 CanLII 23201 (ON SC)
In determining what law should apply to a contract when the contract does not specifically state the applicable law, the courts will conduct an inquiry to ascertain the implied intention of the parties. This requires an objective analysis of all the facts and circumstances surrounding the entire transaction to determine the jurisdiction with which the transaction has its closest and most real connection.
Drafters should ensure that agreements contain a clear governing law or choice of law clause, to avoid disputes and increased potential litigation costs.
In New Holland (Canada) Credit Company v. MacPherson, the issue was whether the law of Ontario or Quebec applied to a contract that had no express governing law clause. The court found that Quebec law was the proper law of the contract for the following reasons: the plaintiff drafted the contract entitled “Retail Installment Contract (Quebec)”; the seller was located in Quebec; clauses pursuant to the Quebec Consumer Protection Act were inserted into the contract; no provision was inserted into the contract that indicated the plaintiff’s desire to have the contract and its interpretation to be governed by a law other than Quebec law (although a box at the top of the contract where the seller could have identified the place of the contract was left blank); the dealership that sold equipment to the defendant was in Quebec; and the equipment was returned to the dealership in Quebec. As well, the court found that the applicability of Quebec law lead to consistency and predictability with regard to similar retail sales contracts. As a result of this finding, pursuant to the law of Quebec the defendant was released from any further obligations under the contract.
To read the full case on CanLII, click here.
Kathy Tomaszewski: Kathy earned an LL.B from the University of Western Ontario and was awarded a Gold Medal for the highest average in her graduating class. She articled as a law clerk to Hon. Bora Laskin, Chief Justice of Canada, Supreme Court of Canada. As a law student, Kathy also worked for one of the ‘Seven Sisters’, drafting proposed amendments to the Income Tax Act, and working in the litigation department. After receiving an LL.M. from Harvard University, Kathy taught law full-time for 10 years at the University of Western Ontario in the areas of constitutional, corporate and commercial law. In addition to teaching and publishing in these fields, Kathy acted as a consultant for the Ontario Securities Commission (researching proposed legislative changes), and the Ontario Human Rights Commission (sitting on Boards of Inquiry). Kathy also taught a course in Securities Regulation as an Adjunct Professor at the Law Faculty of the University of Toronto.While caring for her growing family, Kathy launched her own business in private educational therapy. Kathy has worked with many individuals challenged by learning difficulties and developmental delays, helping them to become independent learners. She has designed and taught courses in all subjects K-grade 8, with a specialty in logic, critical thinking, and writing skills. Kathy continues to act as a research consultant for small law firms on issues ranging from family and criminal law, to human rights and constitutional law. Kathy started with Clausehound in November 2014, and is the Company’s Knowledge & Research lead.