A recent decision of the BC Supreme Court (DirectCash ATM Processing Partnership (a firm) v Main Food Stop (a partnership), 2018 BCSC 1851) highlights the importance of reading and understanding a contract before signing it and how not doing so can prove costly.
DirectCash ATM Processing Partnership (a firm) v Main Food Stop (a partnership), 2018 BCSC 1851
The plaintiff in this case was a supplier of ATMs and the defendant was a partnership that operated a convenience store. The defendant agreed to have the plaintiff’s ATM placed in its store in exchange for a portion of the ATM fees. Following two brief meetings with a representative of the plaintiff, the defendant signed the plaintiff’s standard form contract without reading it.
The contract required the defendant to keep the ATM operational for the duration of its six-year term. Two years into the term, the defendant sold its store and disconnected the ATM, thereby breaching the contract.
The contract provided that upon breach, the defendant must pay the plaintiff the expected profit that the plaintiff would have received from the operation of the ATM for the remainder of the term. The plaintiff estimated this amount to be $52,088.77.
The Defence
The defendant raised three defences, all of which were rejected by the court.
First, the defendant argued that contract was not binding because the plaintiff’s representative had misrepresented the terms of the contract. Based on the plaintiff’s representative’s testimony to the contrary, the court rejected this argument.
Second, the defendant argued that the contract was not binding because the plaintiff’s representative did not bring the cancellation terms to the defendant’s attention.
The court noted that this defence arose from the decision of the Ontario Court of Appeal in Tilden Rent-A-Car Co. v Clendenning, 83 DLR (3d) 400. The court found that the “Clendenning defence” would require the defendant to prove that the plaintiff knew or ought to have known that the defendant did not consent to the cancellation terms. The cancellation terms were onerous, but not objectively unreasonable, and therefore the court concluded that the plaintiff could not have been expected to know that the defendant did not consent to the cancellation terms.
Finally, the defendant argued that the contract was not binding because the cancellation terms were fundamentally different than what the defendant understood them to be. This is the defence of “non es factum”, which has historically been restricted to those who are blind or illiterate. The court cited the Supreme Court of Canada’s decision in Marvco Color Research Ltd. v Harris, [1982] 2 SCR 774, which held that a person’s carelessness may prevent them from relying upon the non es factum defence.
The court found that the defendant acted carelessly by not reading the contract despite having had the opportunity to do so, and therefore, the non es factum defence did not apply.
The Outcome
The court reassessed the plaintiff’s calculation of lost profits at $34,251.50 and ordered the defendant to pay this amount to the plaintiff.
Takeaway
As this case illustrates, it is unwise to assume that the terms of a contract are “reasonable” as you might define it, or that courts will be sympathetic to a defence that amounts to “I didn’t read the contract”. Had the defendant in this case read the fine print and sought legal assistance to understand it, if required, significant trouble and expense could have been avoided.
Cameron Funnell is a lawyer in our Business Group and can provide clarity with the interpretation of business contracts.