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Franchising and Ontario's Electronic Commerce Act

Written by: Peter Macrae Dillon

Article Overview: This article examines the impact of Ontario's Electronic Commerce Act on franchise systems operating in Ontario. Franchisors in the US have had the benefit of similar laws for some time now. peter macrae dillon Siskinds franchise franchisor franchising lawyer attorney Toronto Ontario Canada

Franchising and Ontario's Electronic Commerce Act

The Electronic Commerce Act ("ECA") received Royal Assent on October 16th and will, with out a doubt, impact your Ontario franchise system.

The purpose of the law is to provide a legal backbone to all of the electronic commerce currently being conducted in Canada (Canada is the world’s second-largest Internet user, after the United States). It accomplishes this by setting out rules for conducting business transactions electronically. What follows is a brief overview of some of the highlights of the ECA.

Voluntary

Of course your business does not have to be conducted in electronic form. No one is required to use, provide or accept documents or information in electronic form without their consent. Therefore, a contract based entirely on an electronic document may be invalidated by the absence of consent of one of the parties. Undoubtedly, the consent issue is an issue that Internet businesses should be keenly aware of when dealing with unsophisticated internet customers.

Electronic Functional Equivalents

The ECA establishes a series of rules allowing for the substitution of electronic equivalents to such basic contractual requirements as signatures and the exchanging and retention of documents in writing, including originals. However, for an electronic agreement to become enforceable under the ECA, it must have been provided to the person signing it and must be capable of being retained by that individual. Please note that the posting of a document on the website of one of the parties is not retention for purposes of the ECA.

Error Correction Mechanism

The ECA allows for an individual, who makes a material error in a transaction, to abandon the transaction and to return or destroy any consideration received. The transaction must have been implemented by an “electronic agent”, such as a computer program that operates without immediate human review of the documents. It would be smart e-business practice to give customers a clear opportunity to review and correct errors in their on-line orders.

Signature

Although electronic signatures are now binding, we do not yet have a comprehensive definition of what constitutes an electronic signature. Furthermore, there may be regulations that prescribe certain reliability and technological requirements. And, although the importance of being able to rely on a signature seems obvious, the ECA determines reliability by considering the circumstances, the purpose of the document and the timing of the signature. Until further elaboration has been provided by law or by the courts, we recommend the use of a scanned electronic signature, replicating the signatory’s “real” handwritten signature.

Assurances

The ECA requires a “reliable assurance” that the information is complete and unaltered. However, the reliability of that assurance can vary depending on the document’s purpose. Obviously, such vague criteria will be ripe for litigation.

In and Out Box

The ECA sets out rules that establish the time and place a contract is deemed to have been sent and received. This may affect the when and where of establishing the time and place a contract was formed. The concern here, of course, is that this could affect which laws govern the contract. A parties location for an electronic transmission is deemed to be their place of business or, if none, their place of residence. An electronic document is considered sent once it leaves the sender’s control and is considered received once it is capable of being retrieved and processed by the recipient.

Other Sectors

In addition to its application to the private business sector, the law will also apply to government and other public sector agencies. Provincial governments, agencies, municipalities, and local boards are permitted to deal with information and documents electronically and to make or receive electronic payments. They may not, however, require citizens to communicate electronically.



peter macrae dillon Siskinds franchise franchisor franchising lawyer attorney Toronto Ontario Canada

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