Mind your T’s & C’s: Implications of Ontario’s proposed revamp of the Consumer Protection Act

For companies operating in Ontario, it may soon be time to revisit the terms and conditions included in your contracts for Ontario consumers. 

On February 6, 2023, the Ontario Ministry of Public and Business Service Delivery (the “Ministry”) released a consultation paper titled Modernizing the Consumer Protection Act, 2002. The consultation paper contemplates a slew of amendments to Ontario’s Consumer Protection Act, 2002, S.O. 2002, c. 30, Sched. A (the “CPA”) that are collectively intended “to strengthen protection for consumers, adapt to changing technology and marketplace ‎innovations, and streamline and clarify requirements to improve consumer and ‎business understanding and compliance”.  The period for public comments recently closed on March 17, 2023.

Among the proposed amendments to the CPA are changes that would prohibit the inclusion in consumer contracts of terms that limit or waive consumer rights such as joining a class action lawsuit or bringing a civil action in court (i.e., class or court action waivers and mandatory arbitration clauses). Although such terms are already unenforceable in Ontario, the proposed amendments regarding prohibited contract terms would grant additional rights to a consumer that is party to a contract containing such terms, including the right to cancel the contract within one year after entry.

We have described in greater detail below the Ministry’s latest efforts to empower Ontario consumers by proposing amendments to the CPA that would prohibit certain terms in consumer contracts and permit consumers to void contracts containing such terms, and have outlined the “Key Takeaways” for companies that may be impacted by these amendments.

The proposed prohibited terms

Ontario’s CPA currently provides that the “substantive and procedural rights given under [the CPA] apply despite any agreement or waiver to the contrary”. As such, the CPA already precludes the enforcement of any contract terms in consumer contracts that would waive or limit a consumer’s statutory rights. Nevertheless, many companies conducting business in Ontario continue to include such unenforceable contract terms in their consumer contracts. For example, US-based companies operating in Ontario frequently maintain cross-border consistency in the terms and conditions included in their consumer contracts by leaving in such unenforceable contract terms.

In its consultation paper, the Ministry has identified the mere inclusion of unenforceable contract terms in consumer contracts as having the potential to mislead consumers about their statutory rights. The Ministry reasons that the unenforceable nature of such contract terms and the protections afforded by the CPA may not be obvious to the average Ontario consumer. Rather, Ontario consumers may rely on the consumer contract itself in evaluating their rights. The Ministry has proposed making amendments to the CPA that would clearly prohibit terms in consumer contracts that appear to waive important consumer rights, such as class action waivers, mandatory arbitration provisions and prohibitions on making fair public ‎reviews or comments. The Ministry has also proposed to ban contract terms that would limit a company’s ‎monetary liability in instances where there has been a breach of the implied warranties and conditions of a consumer contract.

While the Ministry has not included in its consultation paper any specific “legislative language” to implement these amendments to the CPA, it has set out the following three goals for these “reforms”:

• Set out a list of terms and acknowledgements that are prohibited in consumer contracts;
• Void any prohibited terms or acknowledgements; and
• Give a consumer the right to cancel the contract for one year after entry, if the contract contains prohibited terms or acknowledgements.

The Ministry has also outlined the intended impact of these goals, once achieved, as follows:

• A prohibition on contract terms that prevent consumers from posting negative ‎reviews or comments, including clauses stating that a business can bill a ‎consumer if it considers the consumer to have disparaged the business;
• A prohibition on contract clauses that purport to limit a business’ liability if a product ‎fails; and
• A ban on clauses that mislead a consumer about their statutory rights. ‎

The key takeaways 

If the amendments proposed by the Ministry prohibiting certain terms in consumer contracts are made to the CPA, companies operating in Ontario will want to review their terms and conditions to carefully consider whether any language in their consumer contracts may be contrary to the revamped CPA. While it currently may be both convenient and cost-efficient for companies to retain unenforceable terms such as class action waivers and mandatory arbitration clauses in their consumer contracts, the Ministry’s proposed amendments to the CPA would significantly change the cost/benefit analysis of continuing that practice since consumers will have the right to cancel contracts with prohibited terms for up to one year.

Companies will also want to consider the enhanced litigation risk and exposure resulting from the Ministry’s proposed ban on contract terms that would limit a company’s ‎monetary liability for product failure.