______________________________________________________________________________<strong>Stewart</strong> <strong>McKelvey</strong>Doing Business in Atlantic Canadaonly has application to sales of goods, and does not cover an agreement to supply services, even ifgoods are incidentally involved.The SGA contains implied terms as to the quality of goods, including implied warranties (e.g., of quietpossession and of free and clear title) and implied conditions (e.g., that the goods will be of merchantablequality, will correspond to the description and will be reasonably fit for the particular purpose for whichthey are acquired, provided that that purpose is made known to the seller).The SGA also contains provisions setting out rules for determining when ownership of goods passes tothe buyer and requirements for the delivery and acceptance of goods, including place of delivery, time fordelivery, expenses of delivery, the right of examination by the buyer and time for payment. As well, itestablishes the remedies available to any wronged party under a sale of goods contract.In addition to the SGA, the Atlantic Provinces have passed a variety of other acts geared towardsconsumer protection. For example, Newfoundland and Labrador has legislation that governs unfair andunconscionable consumer transactions. The Trade Practices Act provides a right of action against asupplier where a consumer has entered into a consumer transaction with a supplier and has suffereddamages as a result of an unfair trade practice or unconscionable act or practice. Prince Edward Islandhas similar legislation, titled the Business Practices Act.In New Brunswick, the Consumer Product Warranty and Liability Act (“CPWLA”) provides that anystatement made by a supplier, whether written, oral or in advertising, becomes an express warranty if thebuyer reasonably relies upon it in purchasing a product. The CPWLA also establishes a number ofimplied warranties covering title, quality and fitness, and contains a product liability section which imposesstrict liability on a supplier for losses suffered by consumers as a result of defective consumer products,irrespective of any contract or negligence.The other Atlantic Provinces do not have legislation dealing with product liability. However, productliability claims may be maintained by parties under the common law principles of negligence and underthe law of contract for breaches of contractual warranties or conditions. The normal measure of damagesin negligence is for reasonably foreseeable losses. Personal injury and property damage awards areintended to be compensatory. On rare occasions, punitive damages may also be awarded. A recentdevelopment which may have an impact on product liability award levels is the emergence of class actionlawsuits. In 2001, Newfoundland and Labrador passed its Class Actions Act, in 2006 New Brunswickpassed its Class Proceedings Act and in 2007 Nova Scotia passed its Class Proceedings Act. To date,Prince Edward Island has not introduced similar legislation. Like other Canadian provinces, class actionlawsuits in Newfoundland and Labrador have become more frequent over time. A similar experience isexpected in New Brunswick and Nova Scotia. By making access to such lawsuits more affordable forindividual claimants, it seems likely that overall awards for product liability claims will increase in thecoming years.Other consumer protection legislation can be found in provincial acts which specify borrowing costdisclosure requirements that must be complied with by businesses that extend credit. As well, all theAtlantic Provinces have enacted comparable Unconscionable Transactions Relief Acts, which providesrelief to debtors in circumstances where a court finds the cost of the loan to be “excessive” and thetransaction to be harsh and unconscionable.Still other forms of consumer protection are found in provincial statutes which regulate specific industries.Examples of such statutes, which often include licensing or permit requirements, include New Brunswick’sReal Estate Agents Act, Nova Scotia’s Collection Agencies Act, Newfoundland and Labrador’sAutomobile Dealers Act, Prince Edward Island’s Auctioneers Licence Act and Payday Loans Act, and theDirect Sellers Act, a version of which has been passed in all four Atlantic Provinces. Also of note is NovaScotia’s Consumer Creditors’ Conduct Act, which protects consumers from certain kinds of inappropriatebehaviour on the part of creditors.The consumer protection legislation in Newfoundland and Labrador will largely be repealed and replacedwith the coming into force of the Consumer Protection and Business Practices Act (“CPBPA”) onPage 29
______________________________________________________________________________<strong>Stewart</strong> <strong>McKelvey</strong>Doing Business in Atlantic CanadaDecember 1, 2009. The CPBPA will repeal the Consumer Protection Act, the Consumer ReportingAgencies Act, the Cost of Consumer Credit Disclosure Act, the Direct Sellers Act, the Trade PracticesAct, the Unconscionable Transactions Relief Act and the Unsolicited Goods and Services Act and replacethem with a comprehensive and consolidated consumer protection regime.FranchisingFederal lawThere is no federal act specifically dedicated to the regulation of franchises. However, there are manyacts which impact on the operation of franchises, including the Competition Act (with regard to trade andcompetition matters), the Trade-marks Act (with respect to the registration and protection of trade-marks),the Income Tax Act (with respect to taxation rules) and the Investment Canada Act (with respect toinvestment rules governing foreign based franchisors).Prince Edward IslandProvincial lawPrince Edward Island recently passed a new Franchises Act (the “PEI Act”). Alberta and Ontario are theonly other Canadian provinces where franchise legislation has been brought into force. The PEI Actclosely follows the Ontario Franchise legislation, and includes changes that were suggested in theUniform Law Conference of Canada’s Uniform Franchise Act.Duty of Fair DealingThe PEI Act imposes a duty of fair dealing on each party to a franchise agreement and includes a duty toact in good faith and in accordance with reasonable commercial standards. The PEI Act provides anaggrieved party a right of action for damages against a party that breaches this duty of fair dealing. ThePEI Act permits franchisees to join together to form a franchisee association and precludes a franchisorfrom prohibiting or penalizing a franchisee for engaging in this type of activity.Disclosure RequirementsThe PEI Act contains many provisions dealing with the requirement for open disclosure by franchisors. Afranchisor must disclose all material facts about the business operations, capital and control of thefranchisor, about the franchise and about the franchise system. Financial statements, prepared inaccordance with generally accepted accounting principles, must be given to a prospective franchiseeunless the franchisor has a net worth of less than $2-million or the franchisor has had at least 25franchisees conducting business at all times in Canada during a five year period immediately precedingthe disclosure document. The franchisor must provide detailed information about the franchise, includinga list of all the franchisee’s costs associated with the establishment of the franchise, the amounts ofdeposits and fees, etc., the nature of any recurring or isolated fees or payments that would have to bemade by a franchisee, the description of the franchisor’s policies and practices with respect to guaranteesand security that may have to be given by a franchisee, an estimate of the operating costs of thefranchise, earnings projections for a franchise, all terms and conditions on financing, training, advertisingand restrictions on purchase and sale of the business, rebates, commissions and payments of otherbenefits, territory, proximity of other franchisees, trade-mark and other proprietary rights to be given to afranchisee, and rights upon the termination of the agreement and the renewal of the agreement. Afranchisor must also disclose a list of all existing and former franchisees in Prince Edward Island, NewBrunswick and Nova Scotia, including their names, addresses and telephone numbers. The intention isto provide a prospective franchisee with as much disclosure as possible so that a franchisee can make aninformed decision about the franchisor and the franchise.Pursuant to the Franchises Act Regulations (the “Franchise Regulations”), a franchisor may use afranchise disclosure document prepared under the franchise law of another jurisdiction provided that thePage 30