Our Take on Things

Recently I’ve had to deal with some questions from clients about the value and enforceability of documents prepared in anticipation of doing a deal. In one case, the binding nature of a letter of intent was in question, and in another, some clients wanted to know what effect a handwritten list of deal items would have on the sale of a business.

The letter of intent, sometimes called a memorandum of understanding, was created by a professional who contemplated most of the essential elements of the deal. The list of deal items, on the other hand, was the result of a casual brainstorming session between two business people who were trying to negotiate a deal that would make them both happy. The two documents look vastly different and seem worlds apart; but the truth is, they’re not that different.

In the lead-up to a major transaction, letters of intent are often used to clarify the major points of a deal such as purchase price, deliverables, timing and any restrictive covenants that might be required by either side. They’re often used liberally because the parties feel like they’re not binding, or not as binding as the final agreement. The truth is that letters of intent can sometimes be as binding as a formally executed agreement – it will all depend on the wording of the document and how well it evidences the intentions of the parties to be bound. A letter of intent that is clearly exploratory will have a different effect than a clearly binding letter.

The list of deal items is little different. A wish list of clauses, drafted by one side, is going to be treated differently than a list of items that actually evidence points agreed to by both parties – particularly if either party is then obligated to undertake any further actions, such as financial disclosure.

In both cases, pre-papering the negotiation of a deal can be incredibly helpful in making the best deal possible, in lowering legal costs, and in keeping a record of the evolution of the deal. But at the same time it’s important to know that the documents, as well as the conversations about the deal, particularly including any letters or e-mail about the terms, may have a legally binding effect. The best practice is to retain counsel when the deal is contemplated and talk to them about what sorts of documents need to be prepared and when. Setting the terms out on paper will reduce the amount of negotiation on the final agreement and should help reduce unexpected surprises.

Scott R. Young

Over the past 20 years (technically it will only be 20 years on April 1) I’ve had many issues that seem to come up over and over in talking to new clients. Lately, the latest issue to come up again (and again) is getting a signature on an agreement.

The facts are generally the same: the new client has been in an industry for years and they have always done business on a handshake. They believe everyone in their industry does business on a handshake and they will lose business if they insist on putting the terms of business in writing and have both parties sign the agreement.

The new client is now retaining our firm to try to enforce a verbal agreement and spending a lot of money in legal fees to do this.

What I’ve learned from 20 years of Business Law regarding the above is:

1. There is no industry that does business on a handshake – there are businesses within an industry that have done business that way for many years. However, slowly those businesses are being burned by customers and everyone is moving to putting terms in writing.

2. A customer who will not sign a piece of paper setting out the terms they are willing to “handshake seal” on is a customer who has no intention of sticking to those terms.

3. A customer who will not commit to terms in writing is a customer who will take up your time and money chasing them for payment and is probably not the customer you want to have.

A simple agreement setting out what each party will do and what will happen if they do not, does not hinder getting new business: it ensures the business you get is worth having.

Inga B. Andriessen JD

It’s interesting to see the main stream media pick up on some of the more technical aspects of Civil Law Suits these days.

This morning, the GTA papers were commenting on the recent Ontario Superior Court decision finding William Assaf to be a “vexatious litigant” as a result of the volume of law suits he filed over the past 40 years.

The commentary I read indicated this is a very rare finding. The people making the commentary are wrong: it’s not as rare as you think, in fact, most lawyers who I know who practice Business Law have had at least one such case in the past five years.

There is a legal test you have to meet to declare someone vexatious and while I could go through this concept in legal language here, that is just not the type of lawyer I am. Instead, let me break this down into plain English.

A “vexatious litigant” is someone who starts civil proceedings that have no likelihood of success for the purpose of forcing the other party to the law suit to incur legal fees which the “vexatious litigant” has no ability to repay.

Once a lawyer proves that the party is a vexatious litigant, the VL (much shorter to call them that) has to ask permission from the Court before s/he can start a law suit. The VL is not prevented from suing if they have a legitimate claim, but a Judge will decide that before the claim is issued.

I’ve been successful in obtaining VL orders in the past: the behaviour of the VL has to be clear, repeated and involving similar facts or people. If your business is being repeatedly being sued by an entity without any merit to the law suits, a VL order will prevent you from having to deal wiht this repeatedly and is worth a converation with our firm.

Inga B. Andriessen JD

When I went to law school there was a lot of emphasis on the emerging laws related to tech businesses. We spent a lot of time trying to figure out which issues applied, depending on whether the business was online or “bricks and mortar”. A decade and a half later, that distinction is almost non-existent; there are virtually no businesses left that don’t face technology and internet issues every day.

There are certainly those businesses which are strongly associated with technology law – the online retailers, the social networks, the dating sites, the online associations. But now even our plumber, trucker and construction company clients have to deal with internet issues. Just the presence of a website meant to drive business to the physical location or sales team, or a social media account meant to chronicle the company’s new marketing initiative, or even the processing of in-house data and e-mail – all of these present potential hazards which require thinking about various internet issues.

Give yourself an informal audit and see just how online your business really is.

Does your business make any agreement online – whether through an electronic retail (I really wish the phrase e-tail had caught on…) interface or even through e-mail? If so, is it binding? If so, under which jurisdiction’s laws? If there is a dispute, where will it be contested? If there are contract terms, how were they presented, and how was consent validated?

Does your business transfer data across national boundaries? Does that violate Canada’s privacy laws or your user, or third party, agreements? What is your procedure for a data breach?

Do you have a website? Did you design it or was it contracted out? Do you own the copyright to it? Is there any third party copyrighted material on it that may make you liable for damages in the thousands? Do you have a valid terms of use that govern visitor use of the site?

Do you actively monitor your brand and your trade-marks across the web? Do you enforce use of your marks and deal with passing off or defamation issues as they occur?

Do you plan to communicate with your customers through e-mail, the internet or text messaging? Do you know all about Canada’s new Anti-spam legislation? Are you actively recording your customer’s consent to your marketing program, and is it in compliance with the law? Are you familiar with the penalties that could put your company out of business for a minor infraction?

If you can’t answer all of these questions with absolute certainty, then you should be talking to us about your exposure as soon as possible.

Scott R. Young

A recent decision of the Ontario Court of Appeal drives home once again the title of this blog: put intentions in writing.

The case of Mountain v. Mountain Estate 2012 ONCA 806 is the sad story of what happens when people rely on an oral contract to handle complex business transactions. In the Mountain case, a son relied on the Oral Contact between him and his parents that he would receive the family dairy farm if he worked on it after school, rather than pursuing his own farm or career. The father died without putting this in his will and the son did not obtain a written contract when he and his parents came to this agreement in 1977.

The son now has had to sue his father’s estate: the emotional let alone legal costs of this are no doubt massive. The Court of Appeal decision referred the case back to a trial, so the legal fees will just keep piling up without any resolution in the near future.

Lately our firm has heard from many people indicating it is their preference to do business on a handshake. Some appear to believe this is cheaper than using a lawyer: it is not.

If you are going into business with someone who will not commit to putting the terms of that business in writing and signing it you have to wonder why. Is this person being truthful or are they intending to avoid their promises to you? Even if the person is being truthful, memories fade and details are forgotten or recalled differently by the parties.

The worst situation when dealing with an oral agreement is the death of one of the parties – now you’re dealing with the grieving estate who may not have any knowledge of the agreement and litigation will prevail.

It is far cheaper to have a lawyer to create a contract at the start of a relationship when everyone is happy, than to pay a lawyer to litigation the intention when everyone is angry.

Enough of the oral contract days – get it in writing, it’s cheaper.

Inga B. Andriessen JD

This weekend the Liberal Party of Ontario elected the first woman who will Premier of Ontario. This woman also happens to be openly Gay.

As I read the news headlines I couldn’t help but think, do either matter? It is 2013: when do we stop labelling people by their gender, sexual orientation or ethnicity?

As a female litigator with twenty years experience I find myself frustrated by people who try to focus on the fact that I’m a woman. I’m a litigator. People hire me because I’m a good lawyer, not because I’m a woman.

Kathleen Wynne was presumably elected becaue the Liberals believe she is most likely to lead them to victory in the next election: not because she is a woman and not because of her sexual orientation.

In our firm we help businesses create workplace policies that comply with non-discrimination legislation and work with management to encourage them to have a workplace free of discrimination.

A discrmination free workplace is not an “option” in Ontario, it is a legal requirement: if your business is not compliant, get to a law firm now.

No business can discriminate, if it does, it is setting itself up for Human Rights Complaints, Ministry of Labour Complaints and lawsuits, all of which are expensive and frustrating for the parties involved.

Perhaps there will be a time when the majority of people will no longer focus on gender, ethnicity or sexual orientation when describing occupations, though I suspect that day is a long way off.

In the mean time, let me answer the title of this Blog: no, it does not matter that our Premier designate is a Woman, a Premier is a Premier, regardless of gender.

Inga B. Andriessen JD

I heard an interesting report on the news yesterday and followed it up by reading an article in the Globe & Mail today about the cost to Ontario Small Business due to red tape.

As you’re reading this Blog Entry, scroll down to the one Scott wrote last week – notice all the paragraphs about the Acts that have to be complied with?

Last week’s Blog didn’t even scratch the surface – there are a lot of obligations on Ontario Companies due to Provincial Legislation and Regulation.

The CFIB (Canadian Fedaration of Independent Business) has estimated the cost to be just under $ 6 000.00 per employee per year to a business.

We’ve noticed a trend over the past four years of more Government requirements in the workplace: accessiblity, increased harrassment policies, enhanced privacy requirements, it feels like it never ends.

Of course, if you have made the business decision not to comply, the feeling of “endlessness” will soon be replaced by dread and frustration, not to mention costs. Refusing to comply is not the solution to frustration, getting involved in the political process to effect change is.

It is far cheaper to pay the legal fees to comply, than the legal fees to respond to inquiries, complaints and lawsuits.

Still, that $ 6000 per employee per year number – wow is that high.

Inga B. Andriessen JD

The news is buzzing this morning with reports that Lance Armstrong has admitted to using performance enhancing drugs. I find it unsurprising, if a little disappointing. Lance is a great athlete, but it’s important to play by the rules of whatever game you find yourself in. If you don’t, you have to pay the price. It seems like his will be a large one.

(Cue segue)

Many of our clients, particularly those will small and medium sized business, often have trouble navigating the rules of the game they’re playing. And sometimes, not playing by the rules is just a consequence of being too busy trying to run your business, rather than any sort of intentional wrongdoing. But the excuses don’t affect the consequences.

Our job is to help out with the rules. As professional business advisors, we have specific skills that come into play when things go wrong (litigator work), and in preventing things from going wrong (solicitor work). In addition to helping with those specific problems that our clients know about, we also do compliance audits as a value-added service to try to avoid unexpected problems.

A compliance audit starts as a friendly conversation about all of the horrible things that can go wrong if you don’t comply with the myriad and intersecting legal framework that your particular business is involved in. We find that well-educated clients are a lot more comfortable with making decisions about their priorities and business objectives.

While this blog medium doesn’t lend itself to an exhaustive list of all of the areas of compliance that every business owner must deal with, here is a purposefully brief overview of a lot of areas where we find compliance gaps.

The Business Corporations Act – the main legislation which governs the existence of your business. Are you properly constituted? Are you up to date with your information filings? Are you keeping the required books and records? Failure in any of these categories might mean the cancellation of your corporate status.

PIPEDA – sometimes mistakenly referred to as the privacy act, PIPEDA is the act which governs the collection, use and disclosure of personal information by private businesses. If your policies are bad, or if you aren’t following them, expect complaints to the Privacy Commissioner’s office. Their investigations aren’t fun.

The Occupational Health and Safety Act – this act is the source of a lot of compliance action lately. Stiff penalties in the millions of dollars, and increased enforcement have followed the requirements of Ontario employers to have harassment policies, violence policies, and now standards for offering services and products to persons with disabilities. This is all in addition to their pre-existing role as the regulator of a host of other health and safety requirements in the workplace.

The Employment Standards Act – if you have employees, you’d better have a good lawyer, or an encyclopedic knowledge of this act, and all of the caselaw that accompanies it. A written agreement, written workplace policies, systems for dealing with reprimands and dismissals – all must haves. Making a misstep in this area will expose you to both civil and statutory damages.

Again, that’s not an exhaustive list by any means, but hopefully it’s enough to drive home the point that there are a complicated set of rules about how to do business in Ontario. If you have any questions about those rules, or require assistance in some way, do not hesitate to contact us.

Scott R. Young

The Mayans were wrong, so we can all continue the tradition of reflecting on the year that was and resolving ways to improve 2013.

There were some interesting Supreme Court decisions that were released this year and make are interesting to reflect on, though probably more interesting to lawyers given their technical nature. Last weeks ruling/non-ruling, depending on whose opinion you ask, regarding the Niqab in Court is interesting – as a litigator I want to see the full face of the person I’m cross-examining. In reading that decision I wonder how the “true measure of the woman’s faith” is determined, those cases will be difficult ones to be the sitting Judge on.

As a firm, I’m very proud of the work we did this year on the line of cases using the Oppression Remedy to collect money from debtors who close their doors in the face of a lawsuit or judgment. While it is not as interesting as the Niqab decision, the case law is making debtors accountable and that is a great result for all creditors, not just our clients.

In terms of resolutions, this is where I get all boring and lawyerly . Our firm resolves to continue providing plain English, reasonably priced Business Legal advice. We also resolve to have an interesting Blog each week and tweet each day, which may be less legal than sarcastic, but a tweet is a tweet.

We all wish you the very best in 2013!

Inga B. Andriessen, JD