Ontario’s new Consumer Protection Act, 2002 (CPA) imposes new obligations on suppliers and gives new rights to consumers who conduct business on the Internet.1 The new regime, which begins when the CPA comes into force on July 30, 2005, applies to consumer agreements entered into on the Internet (a) that involve a payment of more than $50; and (b) if either the supplier or the consumer is located in Ontario when the transaction takes place.
The following are the principal new obligations and rights under the CPA regarding Internet agreements:
- Specified Information. Before a consumer makes a purchase, the supplier must provide specified information about the goods or services in a way that is clear, comprehensible and prominent and that enables the consumer to retain and print the information. These are some of the specified items of information: the supplier’s contact information; a fair and accurate description of the goods or services; an itemized list of all prices and charges (such as customs or brokerage fees, the total amount payable, the applicable currency and all payment and credit terms); the date, location and manner of delivery or performance; the rights of cancellation, return, exchanges, refunds and trade-ins; and any other restrictions, limitations and conditions that the supplier imposes.
- Agreement Terms. Provisions in Internet agreements that require consumers to resolve disputes by arbitration or that otherwise prohibit or limit the right of a consumer to resolve disputes in court (including in class actions) will not be enforceable by the supplier. In addition, the CPA requires that ambiguities in a consumer agreement be resolved in favour of the consumer; provisions in Internet agreements that are inconsistent with this requirement will not be enforceable by the supplier.
- Agreement Delivery. The supplier must deliver a copy of the Internet agreement to the consumer, within 15 days of entering into the agreement, by email, fax, mail or delivery. The Internet agreement must include the disclosures discussed above, the name of the consumer and the date that the supplier and consumer entered into the agreement.
- Consumer’s Right to Cancel. If the supplier fails to disclose the specified information or give the consumer the opportunity to accept, decline or correct the agreement, the consumer can cancel the agreement (and related agreements) until seven days after receiving a copy of the agreement. If the supplier fails to provide a copy of the agreement, the consumer can cancel it within 30 days of entering into the agreement.
- Refunds. The CPA makes it easier for consumers to notify suppliers to cancel Internet agreements and demand a refund. For example, notice may be given to any address of the supplier known to the consumer (such as any retail outlet). Suppliers must make the refund within 15 days of the consumer’s demand.
- Limits on Amendment, Renewal and Extension. The CPA severely curtails the ability of suppliers to change consumer agreements, including Internet agreements. Under the new regime, suppliers may only unilaterally amend, renew or extend the term of consumer agreements if (a) the original agreement contains a provision that expressly allows for the unilateral amendment, renewal or extension by the supplier; (b) notice of the amendment, renewal or extension is provided at least 30 but no more than 90 days in advance of the date that the amendment, renewal or extension takes effect; (c) the consumer is given a copy of the amended agreement; and (d) the supplier provides the consumer with at least one of two options: (1) to terminate the agreement, and (2) to retain the existing agreement unchanged. Suppliers who are not willing to continue to do business on the existing terms and who are willing to lose a customer who is unhappy with the proposed change should give consumers option 1 only.
- For renewals and extensions of an Internet agreement, these rules require a supplier to give each consumer advance notice of the agreement’s expiry and the option to renew or terminate (and this appears to be true even if the agreement stipulates that it automatically renews). One way for suppliers to avoid this administrative burden is to ensure that their consumer agreements have an indefinite term, with rights of termination for the supplier and the consumer after an appropriate period of notice.
- If the agreement contains no unilateral amendment provision, the supplier must give the consumer notice of the proposed changes and the consumer must expressly agree to the changes. The amended agreement will be effective on the date specified in the proposal, but only if the supplier sends a copy of the amended agreement within 45 days of the consumer agreeing to the changes.
- Increased Fines. Fines for breaches of some provisions of the CPA have increased to $50,000 for individuals and $250,000 for corporations.
- Estimates. Suppliers may not charge a consumer more than 10% above any price estimate.
- Unsolicited Goods and Services. Consumers who receive unsolicited goods and services have no obligations regarding their use or disposal, and it is an offence for the supplier to demand payment for them, even if the goods and services have been used, received, misused, lost, damaged or stolen. Furthermore, suppliers are not entitled to assume that inaction or payment by the recipient, or the passage of time, constitutes a request for the goods or services. This means that a consumer could pay for unsolicited goods or services, use them and then demand a refund.
- Warranty for Services. The CPA introduces for the first time in Canadian law the principle that services supplied under a consumer agreement are deemed to be of a "reasonably acceptable quality". Today, many services sold via Internet agreements are sold on an "as is" and "as available" basis, which will no longer be acceptable. For many companies, this may result in higher prices to meet this higher standard.
Many of these provisions create a new set of obligations and limits on suppliers that are not widely required in other Canadian provinces or the United States. Failing to comply with the CPA can have significant consequences. If you are a supplier located in Ontario, or if you do business with Ontario consumers, you should review your contracts and practices to ensure that you comply with the new law.
1. This article focuses on the impact of this law on Internet agreements only. The new law applies to a broad range of business activities between consumers and suppliers of goods and services.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.