Canadian Legal Forms | Agreements

Well, I am pleased to announce that we have released:

• an Employment Agreement (indefinite term or fixed term) for ALL OF CANADA; and
• an Employee Termination Agreement for ALL OF CANADA!

On top of that, we have updated all of our:

• Independent Contractor Agreement (with the services described in the body of the Agreement or in a separate Statement of Work) for ALL OF CANADA;
• Confidentiality and Non-Disclosure Agreement (one-sided or mutual) for ALL OF CANADA;
• Non-Compete Agreement for ALL OF CANADA; and
• Non-Solicitation Agreement for ALL OF CANADA.

We’ve changed the prices for our Independent Contractor Agreements from $97 plus tax to only $47 plus taxes!

Finally, in the coming weeks, we will be coming out with two BRAND NEW options to purchase our legal forms (giving users 3 options to choose):

• Option #1: Buy a single legal form package
• Option #2: Buy two or more legal form packages at a discount
• Option #3: Subscribe to ALL of our legal form packages for the year for one low price

If I said that we haven’t been busy these past few months, I’d be lying!

We’re doing all of these updates to make sure that our legal form packages are the best on the market. We’re also getting ready to have our legal forms + video guides featured on www.WagJag.com in September! Lots to do. Not enough time!

I thought it would be a good idea to recap what we’ve done this past year and where we’re heading:

• In February / March, we developed and launched our legal forms + video guides. Over the past number of months, we have continued to add more legal form packages (which are lawyer-prepared, customizable and very affordable).
• We have been featured in a lot of media this year (in addition to last year), including the Globe and Mail, National Post, Newstalk1010 Radio, Goldhawk Live, and other places.
• In October / November, we redesigned and relaunched Dynamic Legal Forms, with a new homepage, blog, and navigation, making it well…dynamic…
• We launched a legal humour vignette called “The DL Show” (funny legal stuff). We have 2 episodes out there: Reduce Your Taxes and The Law of Superstition, with more on the way!

So what’s in stock for the new DL? Well, we’ve got more of the old: more legal forms, more DL Show episodes, more media (I’ve already been interviewed by the Canadian Lawyer Magazine and the National Magazine for next year) and more free legal information (through eBooks and the Blog). But we also have something very new and very cool: multiple lawyers with diverse experience in their respective legal areas will start to provide FREE legal information on the Blog. We’ve got a civil litigator, an immigration lawyer, and perhaps others (a trademark lawyer, for example) who will start to contribute their knowledge to the public. It’s going to be great!

Toronto Corporate Lawyer: Ontario and Federal Corporations

Please note that the information provided herein is not legal advice and is provided for informational and educational purposes only. If you need legal advice with respect to incorporating your business, you should seek professional assistance (e.g. make a post on Dynamic Legal Forms). We have Toronto, Ottawa, Hamilton, Mississauga, Brampton, and other Ontario business lawyers registered on the website who can answer your questions or help you with your incorporation. I should know: I’m one of them and you can contact me directly.

Incorporate Your Business

What does it mean to incorporate your business? What are the benefits to doing so? What is required to do so? How does one maintain a corporation (through internal governance measures)? How do you go about dissolving your corporation? In the next series of blogs, I’ll be addressing these and other issues as they pertain to an Ontario Corporation. Remember: corporations are creatures of statute and statutes change from one jurisdiction (e.g. Ontario) to the next (e.g. British Columbia). An Ontario Corporation is governed by the Ontario Business Corporations Act (among other things). Just be mindful of that simple fact!

What is a Corporation?

A corporation is a legal person. It can own assets, open up bank accounts, enter into contracts, sue and be sued, etc. As aforementioned, it is a creature of statute: it is created, maintained, and can be dissolved in accordance with the provisions of the laws that govern it.

Separate Legal Person

Unlike other forms of business structures, a corporation is SEPARATE and APART from its owners (called shareholders) and managers (called directors, officers, employees, agents, etc.). What does this mean exactly? Well, for starters, the corporation can enjoy certain rights, but it is also bound by certain obligations and duties. Certain acts or omissions can be attributed to the corporation or those parties that comprise it (e.g. shareholders, directors, officers, employees, agents). The corporation can own its own property and transfer it to and from its members. It can even contract with its own membership.

Limited Liability

Importantly, the owners of a corporation have limited liability when it comes to the debts and obligations of the corporation. I’ve previously blogged quite extensively about this topic here. The basic idea is that, if a corporation ends up owing money to creditors, then generally only its assets and not those of its members can be subject to exposure to creditors. There are exceptions to this general rule, however (e.g. the corporation fraudulently transferred property to third parties, or directors / officers / shareholders are liable based on statutory provisions, or the courts pierce the corporate veil to impose personal liability on the shareholders).

Taxes

As a legal person, a corporation must file and pay its own income taxes. The corporation must calculate its own taxes as per its own income and expenses. It may need to pay capital gains tax on the disposition of capital property (e.g. shares of another corporation). Corporations are taxed differently from human beings and can be used to defer paying taxes at the individual level (i.e. if retained earnings are not paid out to shareholders as dividends). The big problem with having a corporation pay tax is the second layer of taxation that occurs: one at the corporate level and the other at the individual level (when the retained earnings are ultimately distributed). Another disadvantage to using a corporation is that its expenses cannot be directly attributed or taken advantage of by the owners: the expenses are only able to offset corporate income; but if there is no income, then those expenses get trapped (though they can be carried forward and applied in future years pursuant to certain Income Tax Act rules).

With all these things said, you’d think that a corporation can walk and talk and do everything a natural person can do too. But there’s one important caveat: a corporation cannot act without a human being’s involvement. That’s where the shareholders, directors, and officers get involved, which I’ll discuss next.

Shareholders

Shareholders own the corporation through their share ownership. They have the right to attend and vote at meetings (assuming they have voting shares). This often happens on an annual basis, but can happen sooner if they want to change the board of directors they elected. Their role is that of hands-off manager: they delegate their decision-making powers to the board of directors they elect. Shareholders aren’t totally out of the decision-making picture, however. Shareholder must approve by-laws (i.e. power-giving documents which authorize corporate action) and vote on important matters concerning the corporation’s Articles of Incorporation (e.g. issuance of shares, new share class, restrictions on share transfers, restrictions on business, changing the corporation’s name, etc.). But generally, shareholder do not participate int eh day-to0day operations unless they are also officers and/or directors. However: there is no requirement that they be officers and/or directors.

Directors

Directors are elected by the shareholders. The articles of incorporation specify the maximum and minimum number of directors there can be and the by-laws generally have provisions in place for things like director vacancies (e.g. by death, resignation, etc.). Directors meet every so often to decide on long-term strategy and evaluate the progress of the corporation. They themselves delegate decision-making on a daily or more routine basis to the officers of the corporation. Directors are responsible for declaring and paying out dividends to shareholders and get involved in important corporate matters.

Officers

Officers are those individuals who manage the day to day affairs of the corporation. They have titles like CEO, President, Treasurer, Vice-President, CFO, Secretary, etc. but these are just titles and there’s no formal requirement that they have a particular title. The duties and responsibilities of the officers are generally spelled out in the corporate by-laws and more specifically spelled out in an employment contract.

Fair Dealing – Arthur Wishart Act

Please note that the information provided herein is not legal advice and is provided for informational and educational purposes only. If you need legal advice with respect to drafting, reviewing, interpreting or resolving disputes concerning a franchise agreement, you should seek professional assistance (e.g. make a post on Dynamic Legal Forms). We have Toronto, Ottawa, Hamilton, Mississauga, Brampton, and other Ontario business lawyers registered on the website who can answer your questions or help you with your franchise agreement.

In this blog, I’ll get into the statutory duty of fair dealing which is imposed on parties to a franchise agreement in Ontario under the Arthur Wishart Act.

Section 3 of the Arthur Wishart Act states the following:

Fair dealing

3.(1) Every franchise agreement imposes on each party a in its performance and enforcement.

Right of action

(2) A party to a franchise agreement has a right of action for damages against another party to the franchise agreement who breaches the duty of fair dealing in the performance or enforcement of the franchise agreement.

Interpretation

(3) For the purpose of this section, the duty of fair dealing includes the duty to act in good faith and in accordance with reasonable commercial standards.

As noted here, section 3 of the Arthur Wishart Act does a few things. First, it creates a standard in every franchise relationship: it imposes a duty of “fair dealing” on every party to that agreement, in the performance and enforcement of that agreement. “Fair dealing” includes the duty to act in good faith and in accordance with reasonable commercial standards. The concept of “reasonable commercial standards” is an objective standard which generally must be determined by reference to the competitive marketplace at large.

Any party to a franchise agreement has a right of action for damages against another party to the franchise agreement who breaches the duty of fair dealing in the performance or enforcement of the franchise agreement (which includes the performance or enforcement of all ancillary documents). These provisions cannot be contracted out of or waived by the parties: see Shelanu Inc. v. Print Three Franchising Corp., (2003), 64 O.R. (3d) 533 (C.A.).

Unfortunately, good faith and fair dealing are not free-standing concepts capable of formulaic description. Courts have found that, while there is a common law duty of good faith between parties to a franchise agreement which exists independently from section 3 of the Act, the latter has simply codified that common law duty: see Shelanu Inc. v. Print Three Franchising Corp., (2003), 64 O.R. (3d) 533 (C.A.).

Note: At common law, parties to a franchise agreement have an obligation to “act in good faith towards one another”, act with “utmost good faith”, and “have regard to the legitimate interests of one another”: see WP (33 Sheppard) Gourmet Express Restaurant Corp. v. WP Canada Bistro & Express Co., [2010] O.J. No. 2069.

The standard of good faith allows a party to act self-interestedly, but qualifies this by requiring that party, in its decisions and actions, to have regard to the legitimate interests of the other party. This duty therefore requires that a party deal honestly and reasonably with the other party. Whether or not a party has breached that duty of good faith will depend on all the circumstances of the case, including whether that party conducted itself fairly throughout the process: 1323257 Ontario Ltd. (c.o.b. Hyundai of Thornhill) v. Hyundai Auto Canada Corp., [2009] O.J. No. 95. Concepts of “good faith” and “fair dealing” do not exist in a vacuum; they are considered and interpreted by the Courts in light of all the specific facts and the surrounding circumstances.

Courts have found the following duties of good faith and fair dealing apply (both before the franchise agreement is entered into and during the franchise relationship):

Duty to Disclose Information

The franchisor has a positive obligation to disclose accurate financial information and facts to a prospective franchisee at the time of entering into the agreement. In Machias v. Mr. Submarine Ltd., [2002] O.J. No. 1261, the Ontario Superior Court of Justice held that part of the franchise relationship included a positive obligation to disclose accurate financial information and facts to a prospective franchisee at the time of entering into a franchise agreement.

Duty Not to Misrepresent

The franchisor will be liable for losses arising from misrepresentations it makes and for a failure to comply with its disclosure obligations. This has been previously discussed in blog posts about misrepresentation based on tort or in equity, or based on a statutory right of damages based on misrepresentation.

Duty to Assist

A franchisor’s failure to provide support (e.g. based on industry standards or promised in the agreement) to its franchisee has been held to be a breach of the duty of good faith and fair dealing. In Machias v. Mr. Submarine Ltd., [2002] O.J. No. 1261, the Ontario Superior Court of Justice held that Mr. Submarine had failed to provide the promised support to the franchisee after it opened, contrary to the obligation of good faith and fair dealing between franchisor and franchisee. Furthermore, in Katotikidis v. Mr. Submarine Ltd., [2002] O.J. No. 1959, the Ontario Superior Court of Justice held that Mr. Submarine had a legal obligation to assist the plaintiffs when they experienced difficulties in the operation of their franchise, as well as in offering a new franchise to them.