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Much like over 2 billion people globally, 19 million in Canada, and 1.8 million in British Columbia, Deborah Douez has a Facebook account. And much like two billion people before her, Ms. Douez clicked “I agree” to Facebook’s terms and conditions when creating her Facebook account in 2007.
In 2011, Ms. Douez sued Facebook. In June of 2017 a split Supreme Court of Canada (“SCC”) held that she could pursue her action against Facebook in British Columbia. In the process, the Court considered the nature and legitimacy of the ubiquitous online “consumer contract of adhesion” – or those pesky terms and conditions users have to accept when creating most social media accounts.
In brief, the core of Ms Douez’s legal claim is that Facebook violated s.3(2) of British Columbia’s Privacy Act RSBC 1996 c 373, after the site used her image without her consent for promotional purposes. However, the issue considered by the SCC in Douez v Facebook 2017 SCC 33 [Douez] was not the privacy infringement. Rather, the case concerned the enforceability of the forum selection clause in the consumer contract of adhesion Ms Douez “signed.” This clause stated that any claim against Facebook, irrespective of the user’s geographic location, must only be pursued in California. These clauses are valued in private international law for promoting stability and predictability for commercial transactions and are frequently upheld by courts.
However, consumer contexts differ from international commercial transactions: negotiation is impracticable, bargaining power is unequal, and privacy as a quasi-constitutional right is a concern. Should the same high level of deference usually extended to forum selection clauses govern the casual nature of creating a social media account? Should the two-step commercial forum selection test traditionally applied from ZI Pompey Industries v ECU-Line NV, 2003 SCC 27 [Pompey] be altered in lieu of the different consumer context? For an analysis of these arguments before the Court, see Kiran Mahal’s coverage of the case here. In a contested, 4-3 decision, the Court applied and refrained from significantly modifying the Pompey test. Rather than alter the Pompey test, the Court factored the nature of the contract into different stages of the analysis with varying results and implications.
Though the three opinions (one majority, one dissent and one concurrence) drew upon a variety of areas of law— from basic contractual principles, civil procedure, statutory interpretation, conflict of laws, and the ever-present and always-ambiguous public policy—this post focuses on the nature and legitimacy of online contracts between users and social networking sites.
For the case to be tried in British Columbia, a court would have to rule against Facebook’s motion to strike and find the forum selection clause unenforceable. While the motions judge did exactly this, the British Columbia Court of Appeal unanimously overturned the decision in favour of enforcing the forum selection clause. While s.4 of the BC’s Privacy Act states that the British Columbia Supreme Court has jurisdiction over actions under the Act, the common law forum non conveniens doctrine and Pompey test are also relevant. There was disagreement among the lower courts as to how to resolve the tension between the statutory and common law tests.
Recognizing that enforcing a forum selection clause is analytically distinct from the statutorily codified forum non conveniens test, all three opinions of the Supreme Court applied the common law test from Pompey. This 2-step test first asks the defendant to demonstrate that the clause is enforceable, according to contract law principles. After successfully doing so, the onus shifts to the plaintiff to demonstrate a “strong cause” for denying a stay despite the contract’s validity. It is here where the Court’s opinions significantly diverge. The majority (Karakatsanis, Wagner and Gascon JJ) held that the clause was valid and enforceable, yet it would not be reasonable or just in this circumstance to enforce it (para 50). Abella J, concurring in the result, held that the clause would fail at the first stage as it was not enforceable based on contractual principles. However, McLachlin CJ, Moldaver and Cote JJ dissented, finding the contract enforceable with no strong reason to deny a stay.
The diversity of principles considered when characterizing internet-based contracts is fascinating. Each interpretation has interesting implications for the future enforceability and legitimacy of these contracts. Take, for example, the decision of the majority. After establishing that factors such as inequality of bargaining power are pertinent at both stage 1 and stage 2, they very quickly validate the forum selection clause’s enforceability(see para 46). The remainder of the decision considered how justice, public policy, and privacy rights created a “strong cause” for overriding the enforceability of the clause.
Conversely, Abella J in her concurring opinion demanded some form of legal recognition for the reflexive and almost automatic nature of signing these contracts. For Abella J, the contract offended basic principles of autonomy, choice and consent at the foundation of liberal contract making. Not only that, but the forum selection clause imposed potentially insurmountable geographic and legal barriers against the litigant when pursuing claims against an online corporation. For these reasons she invoked the doctrine of unconscionability and found the clause itself was unenforceable (para 116-117).
Even though the result is the same, locating the analysis at stage one versus stage two of the Pompey test is significant. Based on the opinion of the majority, the general legitimacy of the Facebook user agreement remains intact; any future claim to the unenforceability of the contract will depend on the nature of the claim, the clause invoked and a myriad of other factors involved in any litigation. However, in locating the analysis within basic contract principles, Abella J shoots an arrow straight through the heart of the pervasive user agreement.
User agreements depend on the extension of basic contract principles to the web in combination with s.15(1) of the Electronic Transaction Act SBC 2001, c10 equating electronic acceptance (e.g. clicking “I agree”) with legal acceptance. This system means that determining the contract’s validity does not depend on a consent based on knowledge and choice versus one that is uninformed and passive. Rather the law assumes the contractor has read the terms and conditions, hiding behind the old colloquialism that ignorance is no defence. But Abella J’s opinion questions the legitimacy of this ‘consent’. As she asks at para 99, “What does ‘consent’ mean when the agreement is said to be made by pressing a computer key?” She points to the elephant in the room of consumer contracts, the likelihood that consumers have not read the terms of the agreement and their systematic inability to negotiate the terms even if they had.
Exacerbating this weakness is the fact that consumer adhesion contracts have become one of the most common tools for internet-based corporations to facilitate their business. Abella J is aware of the pervasive nature of these contracts, and the problems the e-consumer context poses versus traditional commercial agreement. This leads Abella J to recognize that more legal scrutiny is warranted. While Abella J ?did not invalidate the entire contract, she states: “that some legal acknowledgment should be given to the automatic nature of the commitments made with this kind of contract… at the very least to intensify the scrutiny for clauses that have the effect of impairing a consumer’s access to possible remedies.” (para 99). Such legal recognition is commendable in my opinion, giving future litigants a foothold for challenging the validity of any online, “automatic” contract between a consumer and a large, multi-national corporation.
While the majority and concurring opinions applied public policy concerns to invalidate a clause (either on strong cause or contract principles), the dissent took a more focussed approach to the strong cause test. In doing so, they are perhaps more faithful to Pompey while losing some of the broader context useful in considering the enforcement of a forum selection clause. The dissenting opinion dissected every claim by the Plaintiff as to why the contract should not be enforced, and rejects – somewhat hastily and unconvincingly in my opinion – each in turn. Instead, they appeal to necessary virtues of stability and predictability in a globalized world of international commerce to enforce the contract. This is a poignant reminder of the potential implications on all legal agreements when basic contract law principles are redefined. The dissent is unsatisfying in that it fails to distinguish between the commercial and consumer. It relies on the procedural “I accept” and does not probe the imbalance of bargaining power that occupied the analysis of the other two opinions.
Douez v Facebook demands that we re-evaluate both the public and individual interests in an Internet age, especially as they conflict with traditional common law approaches to contracts. Where does the authority of the court end and the autonomy of contract begin? One clear point that comes out of this case is that in the consumer context, the principles and considerations that help us answer this question are contested and complex; parties beyond the two who entered the contract are implicated and their concerns are considered. The split decision shows that it is possible to inject a nuanced and contextual approach when determining the enforceability of consumer contracts of adhesion. Will that will be the Court’s approach in the future? The three opinions drive us on divergent paths ahead.