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Forum Selection
Published in the January 2009 issue of Transportation Notes - View Article
The Ontario Superior Court of Justice recently had occasion to consider the binding nature of contractual arrangements and forum selection clauses. ITEX Corporation is an American company involved in trading and bartering and promoting alternative currency trade for businesses. ITEX was incorporated in the State of Nevada and had an office in Mississauga, Ontario until August of 2003. However, after 2004 it had no place of business in Ontario and was not registered to carry on business in Ontario.
ITEX had an Ontario client, Wembley Marketing Ltd. Wembley commenced an action against ITEX in Ontario, alleging that it had failed to receive various goods and services which ITEX was supposed to have provided. ITEX brought a motion to have the action dismissed or permanently stayed on the basis of a form selection clause in its contract with Wembley.
Wembley took the position that it had no formal contract with ITEX, as the only documentation that had been exchanged between them was a Preferred Membership Application which Wembley had completed. On the Application there was a fairly bold heading “Agreement” and beneath that in small, but legible, type a reference to various terms and conditions including the Operating Rules of the ITEX Trade Exchange. This was signed by Mr. Fuss, as president of Wembley. In the text, there was an acknowledgement that the Operating Rules had been received.
Mr. Fuss claimed that he had not seen the Operating Rules and that indeed he had never really read the agreement very carefully before he signed it. A witness on behalf of ITEX testified that the Rules were sent to every customer of ITEX and that in any event they were available on the website, a reference to which was visible on the Preferred Membership Application form. The Rules contained a clause providing that any action arising under the agreement should be brought in the courts of Sacramento, California and also that the parties would resolve any dispute in accordance with the Commercial Rules of the American Arbitration Association in Sacramento.
The Ontario Superior Court of Justice found firstly that there was a binding agreement between Wembley and ITEX. Mr. Fuss was an experienced businessman who signed the agreement. The Court found that this case bore no resemblance to the non est factum line of cases, such as Tilden Rent-a-Car v. Clendenning. As the Court stated, “The scenario in this case is a far cry from the situation of the average consumer, leaning over the counter of a busy car rental kiosk, confronted with a non-negotiable, near incomprehensible standard form contract. Mr. Fuss is an experienced businessman. There is nothing in the record to suggest that he was subject to any time pressures in considering whether to sign his name to the agreement. He could have inquired about the agreement before signing it. If he did not have a copy of the Rules already (and I am satisfied that it is more probable than not that a copy was sent to Wembley…) he could have asked for a copy. He could have gone to ITEX’s website… to examine the … Rules. Instead, Mr. Fuss did nothing. His failure to act reasonably should not exonerate him from the terms of the contract.”
The Court went on to consider whether or not the forum selection clause should be enforced and referred to recent jurisprudence in Ontario to the effect that such clauses should be afforded great deference unless a strong case is demonstrated which goes beyond merely determining the balance of convenience. The Court considered the well-known criteria drawn from the case of the Eleftheira and found that most of the criteria referred to therein favoured enforcing the forum selection clause. The Court concluded that the Ontario action should be stayed.
Wembley Marketing Ltd. v. Itex Corporation, 2008 CanLII 67425