contract assignment canada

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The Assignment of Commercial Contracts in Legal Practice

Contracts are a prime example of intangible property. Parties to commercial contracts, like other property owners, frequently want to transfer their property to a third party. The transfer of a contract refers to the assignment of some or all of a party’s rights or the delegation of some or all of a party’s performance, or both, to a non-party to the agreement.

Some common instances in which a contracting party in a commercial context may desire to assign contractual rights, performance responsibilities, or both are as follows:

• In an asset sale, a corporation sells parts or all of its company.
• A contractor who subcontracts its work under certain projects.
• A business conglomerate that is going through an internal corporate reorganization.
• The borrower who offers its lender a security interest in its assets.
• A manufacturer who sells its receivables to a third party.

In any of these cases, the non-transferring party may object to assignment or delegation for a variety of grounds, including:

• The desire to choose the party with whom it does business.
• Concern that a different obligor or obligee may jeopardize the non-transferring party’s capacity to benefit from the contractual deal

To decide whether the transferring party (also known as the transferor) can execute the proposed transfer without gaining the non-transferring party’s approval, the transferring party must turn to relevant legislation and the plain text of the contract. If consent is necessary and not obtained, the transferring party faces the following risks:

• Violation of the contract.
• Making an ineffective and invalid transfer.

The Definitions of Assignment and Delegation

Each party to a contract is an:

• Obligee in terms of its contractual rights; and
• Obligor in terms of its contractual performance responsibilities.

Contract “assignability” is a term frequently used by contracting parties and practitioners. While they may expressly address the assignment of a party’s rights under the contract in some contexts, they frequently use the term “assignment” to refer to both:

• The delegation of duty to perform.
• The assignment of rights to obtain performance.

However, assignment and delegation are two distinct legal concepts that must be treated individually due to the fact that they might have different outcomes.

What is an Assignment?

Assignment is the transfer of some or all of an obligee’s (assignor’s) rights to receive performance under a contract, generally but not always to a non-party (assignee). A contract benefit is a right (a chose in action) that, in theory, may be delegated by the benefiting party to a non-party. For clarity purposes, this informative piece will assume that the assignee is a non-party, although the rights and responsibilities of the parties addressed apply equally to an assignee who is also a party to the agreement. When these rights are assigned, the assignor no longer has any claim to the advantages of the given rights, which are completely passed to the assignee.

Technically, a contract’s burden cannot be assigned under the law (see National Trust Co. v. Mead [i] and Irving Oil Ltd. v. Canada [ii] ). Transferring performance responsibilities under a contract requires the approval of all parties, making such a transfer a novation.

In practice, parties frequently refer to “assigning a contract” or “allowing the assignment of a contract,” which is actually an inaccurate representation of their intentions. For example, the parties may plan for some or all of the following:

• The contract’s rights or benefits may be assigned.
• The contract’s burdens or performance duties may be transferred.
• Rights and burdens may be transferred.

The Effects of Assignment

The assignor is no longer entitled to any benefits from the assigned rights, which have all been passed to the assignee; nonetheless, even if the assignor is stripped of its contractual rights, assignment does not decrease or remove the assignor’s duties to the non-assigning party. As previously stated, a contract’s burden may only be assigned to a third party with the approval of all parties. As a result, the assignor is still obligated to fulfill its contractual commitments. The non-assigning party retains the following:

• Its entitlement to get performance from the assignor; and
• Its remedies against the assignor in the event of non-performance.

The ordinary rule is that a party can only assign its benefits without the consent of the other party to the contract and will remain liable to the other party for its performance obligations (see National Trust Co. v. Mead [iii] and Rodaro v. Royal Bank [iv] ). If the assignor intends to transfer its obligations and both the non-transferring party and the potential assignee agree, the parties should enter into a novation agreement, which results in a new contract between the assignee and the old contract’s remaining (non-transferring) party. In practice, the assignee often undertakes the contract’s performance responsibilities as of the date of assignment, and the assignor gets an indemnity from the assignee in the event of a breach or failure to perform.

A clear, present, purpose to transfer the assigned rights without needing any additional action by the assignee is required for an assignment to be effective, which means that a promise to assign in the future is ineffective as an actual transfer. Otherwise, no special terminology is necessary to draft an effective assignment.

What is Delegation?

Delegation is the transfer of some or all of an obligor’s (delegating party’s) performance responsibilities (or conditions demanding performance) under a contract to a non-party (delegatee). To be effective, a delegation requires the delegatee to agree to take on the delegated performance; however, unless the non-delegating party has consented to a novation, the delegating party remains accountable for the delegated performance, whether or not it has also transferred its contractual rights.

This is distinct from an assignment of rights, in which the assignor relinquishes its contractual claims upon assignment. As a result, even if the delegating party can effectively delegate its actual performance to the delegatee (such that the delegatee’s actual performance discharges the delegating party’s duty), the delegating party cannot be relieved of its obligation to perform and liability for non-performance unless the non-delegating party agrees to a novation.

There is no precise wording necessary to create an effective delegation, just as there is not for the assignment of rights. When performance is effectively delegated, the delegatee assumes liability for the delegating party’s performance obligations (under an assumption agreement), even if the delegating party retains liability to the non-delegating party for the delegatee’s failure to adequately perform the delegated obligations in the absence of a novation. Under an assumed agreement, the delegating party may have recourse against the delegatee, which is frequently addressed through a contractual indemnity right.

If the delegating party wishes to entirely exclude itself from liability for non-performance, it must get the non-delegating party’s approval to the contract (novation). In the majority of novations, the delegating party, the delegatee, and the non-delegating party all agree on the following:

• The delegatee replaces the delegating party as a party to the contract.
• The delegating party is no longer liable for contract performance.
• The delegatee is directly and solely liable for the delegating party’s contract fulfillment.

Types of Assignment – Legal (Statutory) Assignment vs. Equitable Assignment

• Legal (Statutory) Assignment: An assignment that satisfies the provisions of the appropriate province or territory laws (for example, the Conveyancing and Law of Property Act [v] )
• Equitable Assignment: An equitable assignment may be enforced even if it does not fulfill the statutory requirements for a legal assignment.

Requirements for a Legal (Statutory) Assignment

All of Canada’s common law provinces have enacted legislation allowing the transfer of contract rights. Notably, the legislation for Ontario is the Conveyancing and Law of Property Act .

These statutory assignments are enforceable if the parties comply with the following procedures:

• The assignment is absolute.
• The assignment is in writing, signed by the assignor
• the non-assigning obligor is given express written notice.

A statutory assignment does not need consideration, and no precise words or form are necessary. They can be made as gifts and be valid.

Requirements for an Equitable Assignment

An assignment may be enforceable as an equitable assignment even if it does not fulfill the formality criteria of a statutory assignment. An equitable assignment does not necessitate the use of any specific terms or form. However, in order to comply with any provincial statutes of frauds regulations, the assignment must be in writing. The phrasing must clearly indicate that the assignee is to benefit from the rights being assigned. In contrast to a statutory assignment, consideration is required until there is a full transfer, such as a gift. It is not necessary to provide the non-assigning obligor with express written notification (except in the case of a transfer of land). However, notification is often given largely to assure that:

• The obligor ceases to pay the assignor.
• The assignee has priority over subsequent encumbrances.

Contractual Anti-Assignment & Anti-Delegation Clauses

Rather than relying on relatively uncertain legal rules, most commercial contract parties handle transferability issues in the written agreement. As a result, most commercial contracts include a negative covenant that restricts one or both parties’ rights to assign.

These clauses frequently include specific exceptions that allow one or more of the parties to assign and delegate rights and duties, often to designated non-parties such as affiliates and successors-in-interest to the transferring party’s business.

Courts frequently uphold provisions that prevent assignment because they favor the rights of parties to freely contract. However, subject to specific limitations, there is a broad assumption that contractual rights are assignable. As a result, the case law on anti-assignment provisions is a little erratic. Some courts have upheld anti-assignment clauses and declared the agreement unenforceable. Others have argued that an anti-assignment provision cannot preclude assignment.

Overall, contractual anti-assignment and anti-delegation provisions are commonly included in many types of business contracts. If not, transferability is determined by the contract’s subject matter and the nature of the rights and obligations to be transferred. It is important to stay knowledgeable the existence of such contractual terms when dealing with various commercial contracts…such as contracts for the sale of goods, personal service contracts, commercial real estate leases and various other types of contracts.

If you have any questions about your business’s contractual assignment or delegation needs, contact Cactus Law today to speak with a lawyer specializing in commercial law.

Disclaimer:

The information presented above is solely for general educational and informational purposes. It is not intended to be, and should not be taken as, legal advice. The information given above may not be applicable in all cases and may not even reflect the most recent authority after the date of its publication. As a result, please refer to all updated legislation, statutes, and amendments. Nothing in this article should be relied on or acted upon without the benefit of legal advice based on the specific facts and circumstances described, and nothing in this article should be interpreted otherwise.

About the Author:

Kanwar Gujral is entering his third year at Osgoode Hall Law School in Toronto, Ontario. He has a dedicated interest in real estate, business, and corporate law.

[i] National Trust Co. v. Mead , 1990 CarswellSask 165 (S.C.C.).

[ii] Irving Oil Ltd. v. Canada , 1984 CarswellNat 137 (Fed. C.A.).

[iii] Supra note 1.

[iv] Rodaro v. Royal Bank , 2002 CarswellOnt 1047 (Ont. C.A.).

[v] Conveyancing and Law of Property Act , R.S.O. 1990, c. C.34.

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Understanding Contract Assignment (All You Need To Know)

Wondering what is contract assignment and how it works?

You’re looking to assign your contract and need to better understand the assignment process.

Don’t go any further…

We’ve got what you need!

In this article, we will talk about everything there is to know about a contract assignment process.

We’ve divided this article into the following sections:

What is the assignment of contract

Assignment clause in a contract, types of assignment clauses in a commercial contract, is a contract assignment enforceable.

• Who is involved in contract assignments

How does the assignment of a contract work

Type of contract that can be assigned, assignment vs delegation.

Let’s get started…

An assignment of contract is when a party to a contract hands off the contract terms and conditions to another party.

The assigning party is the “assignor” and the party receiving the contract is the “assignee”.

Once the assignor assigns the contract to the assignee, then the terms and conditions of the contract will apply to the assignee as well.

In some cases the assignor will be completely liberated from its obligations under the contract and in other cases the assignor will have varying degrees of responsibility or liability.

We will cover such details in this article.

When you are looking to assign a contract, the first thing that you should do is to look at your contract and see if you have an assignment clause.

In most commercial contracts, businesses will plan ahead and include an assignment clause.

In most instances, the assignment clause will state that the parties to the contract are not authorized to assign the contract to another unless it is approved by the other party.

The assignment clause will also state in some cases the liability applicable to the assignor.

The assignment clause may state that the assignor will remain obligated to the same extent as the assignee towards the other party to the original contract.

In such a scenario, the assignment of the contract will benefit the other party as it will now have the assignor and assignee responsible and liable towards it.

Before performing an assignment, it’s important to consult the assignment clause in the contract to ensure you respect its terms. 

There are different variations of an assignment clause in business contracts.

We’ll go over the three main contract assignment flavours.

The first type of assignment clause in a contract is when the assignment is entirely prohibited.

In this case, neither party may assign the contract without the prior consent of the other.

Another scenario is that the assignment is generally not authorized unless a party wishes to assign the contract to a subsidiary, an affiliate or an entity of its own corporate group.

If the assignor intends to assign the contract to another entity in its own group of entities the assignment will generally be authorized if the assignor owns more than fifty percent of the shares of the assignee or controls the management. 

A third scenario is when the assignment is generally authorized but subject to a prior notification of the other party.

In such clauses, the other party will still be required to give consent for the assignment but the consent must not be unreasonably withheld.

A contract assignment, to the extent the assignor has followed the terms and conditions of the contract, will be enforceable against the other party.

However, if the assignor does not follow the terms of the contract, the assignment will be unenforceable against the other original contracting party.

If the assignment is not done properly, the assignor, assignee and the other party to the original contract may all get entangled in unwanted legal risk.

To avoid creating legal risk for all parties involved, make sure that you ensure that the contract authorizes the assignment.

If the contract allows for the assignment, make sure the assignor gives the proper preliminary notifications to the other contracting party and receives any required consent or authorization before assigning the contract.

In the assignment agreement between the assignor and assignee, make sure the assignee understands the terms and conditions of the contract so it will perform its obligations as it was originally intended between the original contracting parties. 

It is also important for the assignor to ensure it understands the extent of liability or responsibility it will continue to have following the assignment should the contract require the assignor to remain responsible in some way.

If the assignor continues to have ongoing responsibilities after the assignment, the assignor must include terms and conditions in its own assignment agreement with the assignee to ensure the assignee adequately observes the contract terms to avoid triggering the responsibility of the assignor towards the other contracting party.

Provided the terms and conditions of the assignment are respected, the assignment of the contract will be enforceable.

And assignment will not be effective if it substantially changes the terms and conditions for the other contracting party.

For example, if you are a software company, you will not be able to assign the contract to a real estate company.

This goes without saying!

Who is involved in contract assignments 

There are typically at least three parties to an assignment.

You will have two original contracting parties and a third party.

Among the two original contracting parties, one party intends to assign the contract to the third party.

That party is the assignor.

The third-party agreeing to take over the contract from the assignor is referred to as the assignee.

Essentially, once the contract assignment is performed, the third party becomes a contracting party and the assignor becomes a third party.

So the assignor and assignee swap positions in relation to the other contracting party.

The assignment of a contract is fundamentally not complicated.

The process starts with one party to a contract notifies in writing of its intention to assign the contract to a third-party or assignee.

The other contracting party will either consent or not to the request.

If the consent is given, then the assignor enters into a commercial agreement with the assignee.

This agreement will typically cover the terms and conditions and the commercial considerations between the assignor and the assignee.

Every contract has a value and the assignor will probably require the assignee to pay for the right to take over the contract.

The agreement between the assignor and assignee will also clarify their obligations and responsibilities towards the other contracting party.

Once the assignor and assignee agree on the assignment terms and conditions between themselves, the assignor will prepare an assignment agreement that will be executed between the assignor, the assignee and the other contracting party. 

This assignment agreement will clarify the terms and conditions of the actual assignment and will formally result in the assignment of the contract as of that date.

In the business world, nearly all types of business contracts can be assigned.

The assignment clause will govern the assignment process from a legal point of view.

Although most types of contracts can be assigned, some types of contracts cannot be effectively assigned. 

If a business contract was signed with a person specifically for the skills and abilities of that individual, that individual may not assign the contract.

For example, you’ve asked your favorite band to sign at your wedding, the band could not assign that contract to another because you don’t care for the other signers to be at your wedding.

So a contract signed with an individual or entity based on the considerations and value brought by that specific person or entity cannot be assigned.

In some cases we talk about contract assignment and in other cases we talk about contract delegation.

What is the difference between a contract assignment and contract delegation?

The assignment of a contract is when you hand off the entire contract to another party.

The assignor will typically want to be discharged from its own obligations and the assignee inherits all the contract obligations towards the other party.

When we talk about contract delegation, this is a case when a party does not assign the entire contract but delegates part of its own responsibilities to another party.

A contract assignment is a process where a party to an existing contract transfers or gives up its contract rights and obligations for the benefit of another party.

Contract assignments are relatively frequent in cases where a company restructures and changes its corporate operations.

It can also happen between a company and its suppliers.

No matter the reason for the contract assignment, you’ll need to ensure that you follow the terms and conditions of your contract, particularly the assignment clause.

If you follow the assignment terms of the contract, your assignment will be enforceable against the other contracting party.

We hope that this article was useful to you.

Should you need any legal advice on contract assignment or contract law , we are here to support you.

In the meantime, best of luck!

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Contract formation

Is there an obligation to use good faith when negotiating a contract?

With the exception of the Province of Quebec, commercial agreements between businesses in Canada, such as supply contracts for the sale of goods and services, are governed by the common law and provincial, territorial and federal statutes. In Quebec, which is a civil law jurisdiction, the regulation of the sale of goods and commercial contracts is governed primarily by the Civil Code of Quebec. Unless expressly stated otherwise, the discussion below is focused on the common law provinces and commercial contracts for the supply of goods and services; different rules may be applicable to other forms of commercial contracts such as, for example, franchise agreements, mortgages, loans, agreements for the purchase and sale of land, construction contracts, among others. To the extent that readers are engaged, or are planning to engage, in business in or to contract with parties located in Quebec, specific advice from a qualified lawyer in Quebec should be obtained.

Under the common law, absent an express agreement to negotiate in good faith between the parties, there is no obligation for the parties to negotiate in good faith. However, when it comes to contractual performance, the Supreme Court of Canada has affirmed an organising principle of good faith that requires a duty of honesty in the performance of contractual obligations, as discussed in question 9.

How are ‘battle of the forms’ disputes resolved in your jurisdiction?

A ‘battle of the forms’ typically arises where a buyer and seller have exchanged terms that conflict but they nonetheless engage in performance of the contract without having formally executed a contract. Canadian common law on this issue is inconsistently applied and is based on the facts and circumstances of the case. Approaches that have been taken by the courts include the ‘last shot’ approach (application of the most recent set of terms sent and not objected to); the ‘first blow’ approach (the first set of terms accepted); the ‘shots fired on all sides’ approach (construing both parties’ terms together); and the application of traditional rules of contracting looking to where offer and acceptance occurred.

Is there a legal requirement to draft the contract in the local language?

Most contracts in Canada are concluded in English. With the exception of Quebec, there is no legal requirement to draft a contract in any specific language. In Quebec, which is a French-speaking jurisdiction, contracts that are pre-determined by one party or which contain standard clauses, as well as certain specific types of documents such as order forms, invoices, statements and receipts, must be drawn up in the French language unless the parties expressly agree to have the contract and all associated documents drafted in English. In practice, parties to a negotiated contract in Quebec intending to contract in English will typically also expressly agree to the documents being drafted in English.

Is it possible to agree a B2B contract online?

Yes. In Canada, provincial e-commerce legislation supplements the common law and makes it acceptable for commercial contracts between businesses to be entered into electronically at the will of the parties and such contracts will be enforced so long as there has been clear offer and acceptance. Click-to-accept contracts have been held to be enforceable so long as they can be clearly accessed, read and accepted. In addition, a legal requirement that a document be signed is satisfied by an electronic signature, so long as it meets prescribed requirements (eg, reliability, technological standards).

Statutory controls and implied terms

Are there any statutory or other controls on parties’ freedom to agree terms in contracts between commercial parties in your jurisdiction?

Commercial parties are generally free to agree to terms of their choosing. However, contracts that are prohibited by statute or contrary to public policy may be voided. For example, under provincial Sale of Goods legislation, where there is a contract for the sale of specific goods and the goods, without the knowledge of the seller, have perished at the time the contract is made, the contract is void. Contracts to do anything that amounts to a crime or a tort are considered illegal and void. For example, contracts to charge criminal rates of interest have been held to be void. Under the common law, contracts in restraint of trade have also been held to be contrary to public policy and void unless they are possible of justification on the grounds of reasonableness considering the interests of the parties and the public. It should also be noted that there are statutes that regulate some aspects of contracts, such as provincial arbitration legislation where an arbitration provision is present in an agreement.

Are standard form contracts treated differently?

Commercial contracts between businesses comprised of standard form terms are treated the same as negotiated contracts.

What terms are implied by law into the contract? Is it possible to exclude these in a commercial relationship?

Provincial Sale of Goods legislation in the common law provinces and territories implies warranties as to quality and fitness. In addition, unless the circumstances of the contract show a different intention, there is an implied condition on the part of the seller that it has the right to sell the goods; an implied warranty that the buyer will have and enjoy quiet possession of the goods; and an implied warranty that the goods will be free from any charge or encumbrance in favour of any third party that is not declared or known to the buyer before or at the time when the contract is made. However, the parties to a commercial contract can expressly exclude these implied terms.

Under the Civil Code of Quebec, there is also a warranty for quality, which requires merchants to warrant that a product is free of latent defects that would render the product unfit for the use for which it was intended, or diminish its usefulness to the point that the buyer would not have bought it or paid had the buyer been aware. In commercial contracts, the parties may add to the obligations of this legal warrant, diminish its effects or exclude it altogether, but under no circumstances may the merchant exempt itself from liability for personal acts or omissions.

Is your jurisdiction a signatory to the United Nations Convention on Contracts for the International Sale of Goods (the Vienna Convention)?

Yes, Canada is a signatory to the United Nations Convention on Contracts for the International Sale of Goods (CISG). The CISG has been incorporated into provincial and territorial legislation governing the international sale of goods. Parties to international commercial contracts, where one party is in Canada, often expressly exclude the application of the CISG, and prefer instead to rely on either Canadian or the other party’s domestic law.

Is there an obligation to use good faith when entering and performing a contract?

As discussed in question 1, in the common law provinces, there is no general duty to negotiate in good faith, absent an express agreement to do so. Under the law of Quebec, there is a broad duty of good faith that extends to formation, performance and termination of a contract. Historically, the law in the remaining common law provinces has been reticent to recognise a duty of good faith in contractual performance. However, in the case of Bhasin v Hrynew, 2014 SCC 71, the Supreme Court of Canada recognised a general organising principle of good faith that requires the parties to perform their contractual duties honestly and reasonably and not capriciously or arbitrarily. However, commercial contracting parties remain free to pursue their own individual economic interests. The duty of honesty in contractual performance requires that the parties not mislead each other about matters directly linked to the performance of the contract. The application of the principles of good faith in contractual performance and what constitutes honest performance will be dependent upon context and the facts and circumstances of the case.

Limiting liability

What liabilities cannot be excluded or limited by a supplier in a contract?

In the common law provinces, limitation and exclusion clauses are enforceable according to their terms unless they are unconscionable or run contrary to public policy; these exceptions are narrow. In commercial contracts, parties should not attempt to limit or exclude liability for their own fraud or dishonesty or wilful misconduct as these exclusions or limitations are not enforceable. While liability for breach of contract itself can be limited via a financial cap, discussed in question 11, a total exclusion of liability for this may not be enforceable as it would leave the other contracting party without a meaningful remedy.

In Quebec, commercial parties generally cannot exclude liability for an intentional or gross fault; punitive or exemplary damages; or bodily or moral damages.

Are there any statutory controls on using financial caps to limit liability for breach of contract?

No, there are no statutory controls on using financial caps to limit liability for breach of contract. Commercial contracting parties are free to include financial caps to limit liability in their agreements, subject to the exceptions noted in question 10.

Are there any statutory controls on indemnities used to cover liability risks in contracts?

No, there are no statutory controls on indemnities used to cover liability risks in commercial contracts. Indemnification clauses are interpreted under the normal interpretation rules related to contracts and effect is generally given to the parties’ intentions.

Are liquidated damages clauses enforceable and commonly used in your jurisdiction?

Yes, liquidated damages provisions that operate as a genuine pre-estimate of damages are enforceable and commonly used in Canada. Liquidated damages clauses should not be oppressive, unreasonable or unconscionable or the courts may intervene on equitable grounds. Historically, penalty clauses (ie, stipulated remedy clauses that are not liquidated damages provisions) have been unenforceable in Canada. However, in recent years, there has been waning judicial enthusiasm for striking them down as unenforceable since to do so interferes with parties’ freedom to contract. Penalty clauses may now be enforceable so long as they are not unconscionable. A determination of unconscionability is context-specific, but several factors may be considered by the courts including, but not limited to:

• instances of inequality of bargaining power (generally not applicable in the commercial context);
• a substantially unfair bargain;
• the relative sophistication of the parties;
• the existence of bona fide negotiations;
• the nature of the relationship between the parties;
• the gravity of the breach; and
• the conduct of the parties.

Payment terms

Are there statutory time limits for paying invoices? Is it possible to agree a different payment period?

Commercial parties are free to agree to the time period for paying invoices. However, provincial Sale of Goods legislation provides that, unless otherwise agreed, delivery of goods and the payment of the price are concurrent conditions (ie, the seller should be ready and willing to give possession of the goods to the buyer in exchange for the price and the buyer should be ready and willing to pay the price in exchange for possession of the goods). Actions for breach of contract for failure to pay an invoice are subject to statutory limitations periods, as discussed in question 27, unless the parties have contractually agreed to an alternative limitation period.

Is statutory interest charged on late payments? Is it possible to agree a different rate of interest?

Commercial parties may agree on the rate of interest payable on late payments - however, interest rates may not exceed 60 per cent per annum. Interest rates above 60 per cent per annum are classified as ‘criminal rates’ of interest under the Canadian Criminal Code. Where interest is payable under an agreement but no interest rate is set out, the Canada Interest Act provides that the rate of interest will be 5 per cent per annum.

In addition, under the various provincial court rules, parties that are entitled to an order for the payment of money are entitled to claim, and have included in the order, an award of interest at the pre-judgment interest rate provided for under those rules. For example, in the Province of Ontario, prejudgment interest is calculated from the date the cause of action arose to the date of the order and the prejudgment interest rate is the bank rate established by the Bank of Canada at the end of the first day of the last month of the quarter preceding the quarter in which the proceeding was commenced, rounded to the nearest tenth of a percentage point.

What are the civil penalties for failing to comply with statutory interest rate or late payment of invoices?

There are no civil penalties; a party wishing to enforce payment obligations under a commercial contract must bring a proceeding against the delinquent party.

Termination

Do special rules apply to termination of a supply contract that will be implied by law into a contract? Can these terms be excluded or limited by including appropriate language in the contract?

Commercial parties are free to stipulate the rules applicable to the termination of a supply contract, including any notice requirements. Where there is no notice period set out in an indeterminate term contract, the courts may, in some cases, imply a reasonable notice period unless to do so would be inconsistent with or contrary to the express terms of the agreement, as discussed in question 18.

In addition to any stipulations as to termination that may be contractually agreed between the parties, the common law may allow for termination of a commercial contract where, based on the facts and circumstances of the case, there has been a repudiation of the contract. Repudiation must be more than a mere breach of contract but may occur where one party is substantially deprived of the whole benefit of the contract or where the breaching party indicates an intention to no longer be bound by the contract.

Parties may also be released from their obligations under a contract where the contract has been frustrated. Frustration may occur where there is a supervening event that occurs after contracting through no fault of either party, and which was not foreseeable at the time that the parties entered into the contract, that changes the nature of the parties’ rights and obligations to such a degree that performance is impracticable, impossible or unjust in the circumstances.

If a contract does not include a notice period to terminate a contract, how is it calculated?

As noted above, where the duration of a commercial agreement is not fixed and where there is no provision for termination without cause, the courts may, in certain circumstances, imply a reasonable notice period to terminate the contract. The analysis will turn on the particular agreement under consideration and the circumstances surrounding it. Courts have held that agreements involving elements of trust, confidence, delegation of authority or personal relations between the parties are more likely to give rise to an implied right to terminate on reasonable notice. However, the courts will not imply a term permitting termination without cause on reasonable notice where to do so would be inconsistent with, or contrary to, the clear meaning of the agreement; if on a proper construction of the agreement a perpetual obligation is intended, it will generally be enforced. In cases where it has been implied, what constitutes reasonable notice is dependent on the facts and circumstances of the parties’ relationship. For example, in distribution agreements, the main factors considered in determining the appropriate notice period include, but are not limited to, the length and nature of the parties’ relationship; the dependency of the distributing party on the terminating party’s products or services; and the level of investment made by the distributing party to distribute the terminating party’s product and the volume of business derived from the sale of the product. Courts may also consider established trade or business practices and lost opportunity. The range of what has constituted ‘reasonable notice’ in these types of agreements under Canadian case law is generally between 30 days and two years.

Will a commercial contract terminate automatically on insolvency of the other party?

There is no common law or statutory right to terminate a contract automatically on the insolvency of the other party and the insolvent party is not excused from performing its obligations. Most business contracts include an express term in the agreement under which insolvency gives rise to the right to termination.

Are there restrictions on terminating a contract if the other party is in financial distress?

As noted above, a business contract can include the right to terminate in the event that the counterparty is insolvent. However, if proceedings are commenced under Canada’s primary insolvency legislation (the Bankruptcy and Insolvency Act or the Companies Creditors’ Arrangement Act) then this contractual right is not enforceable due to statutory provisions that preclude termination of contracts simply by virtue of the counterparty’s insolvency or bankruptcy.

Is force majeure recognised in your jurisdiction? What are the consequences of a force majeure event?

Yes, force majeure is recognised in Canada. Events of force majeure in commercial contracts generally include, but are not limited to, ‘acts of God’, fires, strikes, lockouts, floods, war, riot and the like. What constitutes a force majeure and the consequences of a force majeure event depend on the particular wording of the clause, however, such clauses generally operate to suspend the performance obligations of the party invoking the clause for the duration of the force majeure event. When drafting a force majeure clause, it is important to consider the context of the agreement and events within that context that may give rise to delay or failure to perform. Some clauses are drafted such that if the force majeure event continues for a specified period of time and cannot be cured, the contract may be terminated.

Subcontracting, assignment and third-party rights

May a supplier subcontract its obligations under the contract without seeking consent from the other party?

In the absence of any agreement to the contrary, parties to a commercial contract are free to subcontract their obligations without seeking the consent of the other party. However, unless the agreement stipulates otherwise, the original contracting parties remain liable for their performance obligations under the agreement, regardless of whether they have been subcontracted.

Are there any statutory rules that apply to subcontracting in your jurisdiction?

Not with respect to contracts for the supply of goods and services. In these types of commercial contracts, the parties may agree as to whether or not consent is required from the other party to subcontract obligations under their agreement.

May a party assign its rights and obligations under the contract without seeking the other party’s consent?

Most commercial contracts in Canada are drafted to require the consent of at least one of the parties for assignment. Under the common law, unless provided for in the agreement, a party may only assign its benefits under a contract without the consent of the other party (or parties, as applicable); assignment of liability and performance obligations are not assignable without consent, with limited exception. These exceptions include performance obligations where the duties do not involve the exercise of skill, knowledge or a personal quality or competence that was relied upon by the other party in entering into the contract. A determination as to whether performance obligations are assignable without consent is context specific and based on the circumstances of the case. Where liabilities or performance obligations are assigned, the result is considered a novation (ie, an agreement to substitute a new contract, terminating the old one).

Aside from contracts with express anti-assignment clauses, there are some types of contracts where rights and obligations are not assignable; however, most supply contracts would not fall into this category (eg, assignments that violate public policy; personal contracts; mere rights in action; contracts that would result in uncontemplated or increased burdens on the non-assigning party; and assignments prohibited by statute).

What statutory controls apply to the assignment of rights or obligations under a supply contract?

All of the common law provinces and territories have legislation that permits the assignment of contract rights where: the assignment is absolute, in writing and signed by the assignor and express notice is given in writing to the non-assigning obligor. Assignment of rights and obligations under a supply contract are generally freely assignable with consent or if provided for in the contract.

Notably, regardless of whether a supply contract contains an anti-assignment provision, personal property and security legislation provides that a party cannot be prevented from granting a security interest in an account. This would include instances where, for example, a vendor uses its receivables as collateral when borrowing money.

How may a third party enforce a term of the contract?

In general, pursuant to the common law doctrine of privity, only parties to a contract have rights and obligations under it, including the right of enforcement. There are some exceptions to this doctrine, including agency (where the contracting party is an agent for the third party), trust (where the third party is a beneficiary of a trust) and a ‘principled exception’. The principled exception, where the courts may relax the doctrine or privity, considers whether the parties to the contract intended to extend a specific benefit to a third party seeking to rely on the contract and whether the activities performed by that third party come within the scope of the contract in general, or the provision in particular, again taking into consideration the intention of the parties. The principled exception will not apply where the parties expressly state that they do not intend to benefit third parties.

Similar to results that may be obtained using the common law principled exception to the doctrine of privity, in Quebec, the Civil Code of Quebec provides that contracting parties may provide for third-party beneficiaries and sets out circumstances in which contracting parties may revoke the benefit.

What are the limitation periods for breach of contract claims? Is it possible to agree a shorter limitation period?

Limitation periods in Canada are governed by provincial and territorial limitations legislation. There are some exceptions where a limitation period is dealt with specifically in another piece of legislation. Limitation periods for breach of contract claims vary by province and territory, but range from two to six years. In most provinces, the limitation period is two years (in Quebec it is three years) and will begin to run from the date the cause of action arose, or in some cases, the date the cause of action was discovered.

Do your courts recognise and respect choice-of-law clauses stipulating a foreign law?

Yes, in commercial contracts between businesses, with limited exception that may depend on the facts and circumstances of the case, Canadian courts will generally recognise and respect choice-of-law clauses stipulating foreign law. However, in the context of a dispute, in order to invoke the foreign law, it must be pleaded and if the dispute takes place in a Canadian court, expert evidence will be required to prove the foreign law.

Do your courts recognise and respect choice-of-jurisdiction clauses stipulating a foreign jurisdiction?

A forum selection clause will generally be recognised by Canadian courts in commercial contracts as long as it is valid, clear, enforceable and applies to the cause of action before the court. Such clauses are encouraged by the courts as between commercial parties as they create certainty, order and fairness in transactions. However, the courts have discretion not to enforce a forum selection clause where the party attempting to avoid it can show ‘strong cause’ as to why enforcement of the clause would not be reasonable or just in the circumstances. In considering whether there is ‘strong cause’ not to enforce a forum-selection agreement between the parties, the courts take into account all of the circumstances of the particular case, including convenience and fairness between the parties, the interests of justice and, in some cases, public policy concerns. The burden of demonstrating strong cause is a heavy one and it is in rare circumstances that the courts will not enforce a forum-selection clause between commercial parties.

How efficient and cost-effective is the local legal system in dealing with commercial disputes?

The Canadian legal system is not particularly cost-effective or efficient. In most cases, discovery obligations are onerous and several motions may be brought prior to any final resolution, particularly in commercial disputes. Despite good intentions, including some specialised courts and rules in some jurisdictions to simplify procedures, there is a backlog of cases in many courts and, as a result, there are often delays. The resolution of disputes, especially commercial disputes, can take many years and can be very expensive as most lawyers charge hourly rates. For most types of disputes and in most of its jurisdictions, Canada has a ‘loser pays’ rule, which results in the prevailing party being able to recover some of its reasonable costs, but the amount of costs potentially recoverable also varies by jurisdiction and, in some provinces, is quite low.

For commercial disputes, arbitration is becoming increasingly popular as an option because it is private and efficient; parties are usually in control of the timing and discovery obligations are often reduced. However, it can be just as costly and also requires the parties to pay the arbitrator’s or arbitrators’ fees.

Is your jurisdiction a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards? Which arbitration rules are commonly used in your jurisdiction?

Yes, Canada is a signatory to the New York Convention. The provinces and territories have arbitration legislation that governs both domestic disputes (ie, both parties are in Canada and Canadian law is applicable) and international commercial disputes (ie, where Canadian law applies and the parties’ places of business are in different states). A popular choice for applicable arbitration rules are those of the International Centre for Dispute Resolution.

What remedies may a court or other adjudicator grant? Are punitive damages awarded for a breach of contract claim in your jurisdiction?

In the absence of a specific agreement between the parties limiting any particular remedy, courts and other adjudicators may grant any remedies available under the law. The most common remedy for breach of contract is monetary damages; however, declaratory judgments, specific performance and injunctive relief may also be granted. Punitive damages can be awarded for a breach of contract claim in Canada, but rarely are. In general, punitive damages are reserved for exceptional cases where extremely egregious conduct has occurred.

Update and trends

Are there any other current developments or emerging trends that should be noted?

Content is provided for educational and informational purposes only and is not intended and should not be construed as legal advice. This may qualify as "Attorney Advertising" requiring notice in some jurisdictions. Prior results do not guarantee similar outcomes. For more information, please visit:  www.bakermckenzie.com/en/client-resource-disclaimer .

Baker McKenzie delivers integrated solutions to complex challenges. Complex business challenges require an integrated response across different markets, sectors and areas of law. Baker McKenzie’s client solutions provide seamless advice, underpinned by deep practice and sector expertise, as well as first-rate local market knowledge. Across more than 70 offices globally, Baker McKenzie works alongside our clients to deliver solutions for a connected world. Visit  InsightPlus  to access insights and analysis on the latest news, legal developments and thought leadership authored by our expert lawyers. Visit  Bakermckenzie.com  to find out more about our services and how we can assist.

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• assignments basic law

Assignments: The Basic Law

The assignment of a right or obligation is a common contractual event under the law and the right to assign (or prohibition against assignments) is found in the majority of agreements, leases and business structural documents created in the United States.

As with many terms commonly used, people are familiar with the term but often are not aware or fully aware of what the terms entail. The concept of assignment of rights and obligations is one of those simple concepts with wide ranging ramifications in the contractual and business context and the law imposes severe restrictions on the validity and effect of assignment in many instances. Clear contractual provisions concerning assignments and rights should be in every document and structure created and this article will outline why such drafting is essential for the creation of appropriate and effective contracts and structures.

The reader should first read the article on Limited Liability Entities in the United States and Contracts since the information in those articles will be assumed in this article.

Basic Definitions and Concepts:

An assignment is the transfer of rights held by one party called the “assignor” to another party called the “assignee.” The legal nature of the assignment and the contractual terms of the agreement between the parties determines some additional rights and liabilities that accompany the assignment. The assignment of rights under a contract usually completely transfers the rights to the assignee to receive the benefits accruing under the contract. Ordinarily, the term assignment is limited to the transfer of rights that are intangible, like contractual rights and rights connected with property. Merchants Service Co. v. Small Claims Court , 35 Cal. 2d 109, 113-114 (Cal. 1950).

An assignment will generally be permitted under the law unless there is an express prohibition against assignment in the underlying contract or lease. Where assignments are permitted, the assignor need not consult the other party to the contract but may merely assign the rights at that time. However, an assignment cannot have any adverse effect on the duties of the other party to the contract, nor can it diminish the chance of the other party receiving complete performance. The assignor normally remains liable unless there is an agreement to the contrary by the other party to the contract.

The effect of a valid assignment is to remove privity between the assignor and the obligor and create privity between the obligor and the assignee. Privity is usually defined as a direct and immediate contractual relationship. See Merchants case above.

Further, for the assignment to be effective in most jurisdictions, it must occur in the present. One does not normally assign a future right; the assignment vests immediate rights and obligations.

No specific language is required to create an assignment so long as the assignor makes clear his/her intent to assign identified contractual rights to the assignee. Since expensive litigation can erupt from ambiguous or vague language, obtaining the correct verbiage is vital. An agreement must manifest the intent to transfer rights and can either be oral or in writing and the rights assigned must be certain.

Note that an assignment of an interest is the transfer of some identifiable property, claim, or right from the assignor to the assignee. The assignment operates to transfer to the assignee all of the rights, title, or interest of the assignor in the thing assigned. A transfer of all rights, title, and interests conveys everything that the assignor owned in the thing assigned and the assignee stands in the shoes of the assignor. Knott v. McDonald’s Corp ., 985 F. Supp. 1222 (N.D. Cal. 1997)

The parties must intend to effectuate an assignment at the time of the transfer, although no particular language or procedure is necessary. As long ago as the case of National Reserve Co. v. Metropolitan Trust Co ., 17 Cal. 2d 827 (Cal. 1941), the court held that in determining what rights or interests pass under an assignment, the intention of the parties as manifested in the instrument is controlling.

The intent of the parties to an assignment is a question of fact to be derived not only from the instrument executed by the parties but also from the surrounding circumstances. When there is no writing to evidence the intention to transfer some identifiable property, claim, or right, it is necessary to scrutinize the surrounding circumstances and parties’ acts to ascertain their intentions. Strosberg v. Brauvin Realty Servs., 295 Ill. App. 3d 17 (Ill. App. Ct. 1st Dist. 1998)

The general rule applicable to assignments of choses in action is that an assignment, unless there is a contract to the contrary, carries with it all securities held by the assignor as collateral to the claim and all rights incidental thereto and vests in the assignee the equitable title to such collateral securities and incidental rights. An unqualified assignment of a contract or chose in action, however, with no indication of the intent of the parties, vests in the assignee the assigned contract or chose and all rights and remedies incidental thereto.

More examples: In Strosberg v. Brauvin Realty Servs ., 295 Ill. App. 3d 17 (Ill. App. Ct. 1st Dist. 1998), the court held that the assignee of a party to a subordination agreement is entitled to the benefits and is subject to the burdens of the agreement. In Florida E. C. R. Co. v. Eno , 99 Fla. 887 (Fla. 1930), the court held that the mere assignment of all sums due in and of itself creates no different or other liability of the owner to the assignee than that which existed from the owner to the assignor.

And note that even though an assignment vests in the assignee all rights, remedies, and contingent benefits which are incidental to the thing assigned, those which are personal to the assignor and for his sole benefit are not assigned. Rasp v. Hidden Valley Lake, Inc ., 519 N.E.2d 153, 158 (Ind. Ct. App. 1988). Thus, if the underlying agreement provides that a service can only be provided to X, X cannot assign that right to Y.

Novation Compared to Assignment:

Although the difference between a novation and an assignment may appear narrow, it is an essential one. “Novation is a act whereby one party transfers all its obligations and benefits under a contract to a third party.” In a novation, a third party successfully substitutes the original party as a party to the contract. “When a contract is novated, the other contracting party must be left in the same position he was in prior to the novation being made.”

A sublease is the transfer when a tenant retains some right of reentry onto the leased premises. However, if the tenant transfers the entire leasehold estate, retaining no right of reentry or other reversionary interest, then the transfer is an assignment. The assignor is normally also removed from liability to the landlord only if the landlord consents or allowed that right in the lease. In a sublease, the original tenant is not released from the obligations of the original lease.

Equitable Assignments:

An equitable assignment is one in which one has a future interest and is not valid at law but valid in a court of equity. In National Bank of Republic v. United Sec. Life Ins. & Trust Co. , 17 App. D.C. 112 (D.C. Cir. 1900), the court held that to constitute an equitable assignment of a chose in action, the following has to occur generally: anything said written or done, in pursuance of an agreement and for valuable consideration, or in consideration of an antecedent debt, to place a chose in action or fund out of the control of the owner, and appropriate it to or in favor of another person, amounts to an equitable assignment. Thus, an agreement, between a debtor and a creditor, that the debt shall be paid out of a specific fund going to the debtor may operate as an equitable assignment.

In Egyptian Navigation Co. v. Baker Invs. Corp. , 2008 U.S. Dist. LEXIS 30804 (S.D.N.Y. Apr. 14, 2008), the court stated that an equitable assignment occurs under English law when an assignor, with an intent to transfer his/her right to a chose in action, informs the assignee about the right so transferred.

An executory agreement or a declaration of trust are also equitable assignments if unenforceable as assignments by a court of law but enforceable by a court of equity exercising sound discretion according to the circumstances of the case. Since California combines courts of equity and courts of law, the same court would hear arguments as to whether an equitable assignment had occurred. Quite often, such relief is granted to avoid fraud or unjust enrichment.

Note that obtaining an assignment through fraudulent means invalidates the assignment. Fraud destroys the validity of everything into which it enters. It vitiates the most solemn contracts, documents, and even judgments. Walker v. Rich , 79 Cal. App. 139 (Cal. App. 1926). If an assignment is made with the fraudulent intent to delay, hinder, and defraud creditors, then it is void as fraudulent in fact. See our article on Transfers to Defraud Creditors .

But note that the motives that prompted an assignor to make the transfer will be considered as immaterial and will constitute no defense to an action by the assignee, if an assignment is considered as valid in all other respects.

Enforceability of Assignments:

Whether a right under a contract is capable of being transferred is determined by the law of the place where the contract was entered into. The validity and effect of an assignment is determined by the law of the place of assignment. The validity of an assignment of a contractual right is governed by the law of the state with the most significant relationship to the assignment and the parties.

In some jurisdictions, the traditional conflict of laws rules governing assignments has been rejected and the law of the place having the most significant contacts with the assignment applies. In Downs v. American Mut. Liability Ins. Co ., 14 N.Y.2d 266 (N.Y. 1964), a wife and her husband separated and the wife obtained a judgment of separation from the husband in New York. The judgment required the husband to pay a certain yearly sum to the wife. The husband assigned 50 percent of his future salary, wages, and earnings to the wife. The agreement authorized the employer to make such payments to the wife.

After the husband moved from New York, the wife learned that he was employed by an employer in Massachusetts. She sent the proper notice and demanded payment under the agreement. The employer refused and the wife brought an action for enforcement. The court observed that Massachusetts did not prohibit assignment of the husband’s wages. Moreover, Massachusetts law was not controlling because New York had the most significant relationship with the assignment. Therefore, the court ruled in favor of the wife.

Therefore, the validity of an assignment is determined by looking to the law of the forum with the most significant relationship to the assignment itself. To determine the applicable law of assignments, the court must look to the law of the state which is most significantly related to the principal issue before it.

Assignment of Contractual Rights:

Generally, the law allows the assignment of a contractual right unless the substitution of rights would materially change the duty of the obligor, materially increase the burden or risk imposed on the obligor by the contract, materially impair the chance of obtaining return performance, or materially reduce the value of the performance to the obligor. Restat 2d of Contracts, § 317(2)(a). This presumes that the underlying agreement is silent on the right to assign.

If the contract specifically precludes assignment, the contractual right is not assignable. Whether a contract is assignable is a matter of contractual intent and one must look to the language used by the parties to discern that intent.

In the absence of an express provision to the contrary, the rights and duties under a bilateral executory contract that does not involve personal skill, trust, or confidence may be assigned without the consent of the other party. But note that an assignment is invalid if it would materially alter the other party’s duties and responsibilities. Once an assignment is effective, the assignee stands in the shoes of the assignor and assumes all of assignor’s rights. Hence, after a valid assignment, the assignor’s right to performance is extinguished, transferred to assignee, and the assignee possesses the same rights, benefits, and remedies assignor once possessed. Robert Lamb Hart Planners & Architects v. Evergreen, Ltd. , 787 F. Supp. 753 (S.D. Ohio 1992).

On the other hand, an assignee’s right against the obligor is subject to “all of the limitations of the assignor’s right, all defenses thereto, and all set-offs and counterclaims which would have been available against the assignor had there been no assignment, provided that these defenses and set-offs are based on facts existing at the time of the assignment.” See Robert Lamb , case, above.

The power of the contract to restrict assignment is broad. Usually, contractual provisions that restrict assignment of the contract without the consent of the obligor are valid and enforceable, even when there is statutory authorization for the assignment. The restriction of the power to assign is often ineffective unless the restriction is expressly and precisely stated. Anti-assignment clauses are effective only if they contain clear, unambiguous language of prohibition. Anti-assignment clauses protect only the obligor and do not affect the transaction between the assignee and assignor.

Usually, a prohibition against the assignment of a contract does not prevent an assignment of the right to receive payments due, unless circumstances indicate the contrary. Moreover, the contracting parties cannot, by a mere non-assignment provision, prevent the effectual alienation of the right to money which becomes due under the contract.

A contract provision prohibiting or restricting an assignment may be waived, or a party may so act as to be estopped from objecting to the assignment, such as by effectively ratifying the assignment. The power to void an assignment made in violation of an anti-assignment clause may be waived either before or after the assignment. See our article on Contracts.

Noncompete Clauses and Assignments:

Of critical import to most buyers of businesses is the ability to ensure that key employees of the business being purchased cannot start a competing company. Some states strictly limit such clauses, some do allow them. California does restrict noncompete clauses, only allowing them under certain circumstances. A common question in those states that do allow them is whether such rights can be assigned to a new party, such as the buyer of the buyer.

A covenant not to compete, also called a non-competitive clause, is a formal agreement prohibiting one party from performing similar work or business within a designated area for a specified amount of time. This type of clause is generally included in contracts between employer and employee and contracts between buyer and seller of a business.

Many workers sign a covenant not to compete as part of the paperwork required for employment. It may be a separate document similar to a non-disclosure agreement, or buried within a number of other clauses in a contract. A covenant not to compete is generally legal and enforceable, although there are some exceptions and restrictions.

Whenever a company recruits skilled employees, it invests a significant amount of time and training. For example, it often takes years before a research chemist or a design engineer develops a workable knowledge of a company’s product line, including trade secrets and highly sensitive information. Once an employee gains this knowledge and experience, however, all sorts of things can happen. The employee could work for the company until retirement, accept a better offer from a competing company or start up his or her own business.

A covenant not to compete may cover a number of potential issues between employers and former employees. Many companies spend years developing a local base of customers or clients. It is important that this customer base not fall into the hands of local competitors. When an employee signs a covenant not to compete, he or she usually agrees not to use insider knowledge of the company’s customer base to disadvantage the company. The covenant not to compete often defines a broad geographical area considered off-limits to former employees, possibly tens or hundreds of miles.

Another area of concern covered by a covenant not to compete is a potential ‘brain drain’. Some high-level former employees may seek to recruit others from the same company to create new competition. Retention of employees, especially those with unique skills or proprietary knowledge, is vital for most companies, so a covenant not to compete may spell out definite restrictions on the hiring or recruiting of employees.

A covenant not to compete may also define a specific amount of time before a former employee can seek employment in a similar field. Many companies offer a substantial severance package to make sure former employees are financially solvent until the terms of the covenant not to compete have been met.

Because the use of a covenant not to compete can be controversial, a handful of states, including California, have largely banned this type of contractual language. The legal enforcement of these agreements falls on individual states, and many have sided with the employee during arbitration or litigation. A covenant not to compete must be reasonable and specific, with defined time periods and coverage areas. If the agreement gives the company too much power over former employees or is ambiguous, state courts may declare it to be overbroad and therefore unenforceable. In such case, the employee would be free to pursue any employment opportunity, including working for a direct competitor or starting up a new company of his or her own.

It has been held that an employee’s covenant not to compete is assignable where one business is transferred to another, that a merger does not constitute an assignment of a covenant not to compete, and that a covenant not to compete is enforceable by a successor to the employer where the assignment does not create an added burden of employment or other disadvantage to the employee. However, in some states such as Hawaii, it has also been held that a covenant not to compete is not assignable and under various statutes for various reasons that such covenants are not enforceable against an employee by a successor to the employer. Hawaii v. Gannett Pac. Corp. , 99 F. Supp. 2d 1241 (D. Haw. 1999)

It is vital to obtain the relevant law of the applicable state before drafting or attempting to enforce assignment rights in this particular area.

Conclusion:

In the current business world of fast changing structures, agreements, employees and projects, the ability to assign rights and obligations is essential to allow flexibility and adjustment to new situations. Conversely, the ability to hold a contracting party into the deal may be essential for the future of a party. Thus, the law of assignments and the restriction on same is a critical aspect of every agreement and every structure. This basic provision is often glanced at by the contracting parties, or scribbled into the deal at the last minute but can easily become the most vital part of the transaction.

As an example, one client of ours came into the office outraged that his co venturer on a sizable exporting agreement, who had excellent connections in Brazil, had elected to pursue another venture instead and assigned the agreement to a party unknown to our client and without the business contacts our client considered vital. When we examined the handwritten agreement our client had drafted in a restaurant in Sao Paolo, we discovered there was no restriction on assignment whatsoever…our client had not even considered that right when drafting the agreement after a full day of work.

One choses who one does business with carefully…to ensure that one’s choice remains the party on the other side of the contract, one must master the ability to negotiate proper assignment provisions.

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Assignment and Assumption Agreement with Optional Novation

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Anti-Assignment Provisions And Assignments By 'Operation Of Law': What Do I Have To Do? What Should I Do?

Contributor.

Introduction

One of the key roles of legal due diligence in mergers and acquisitions (M&A) is to assist in the efficient and successful completion of any proposed M&A transaction. Due diligence is not merely a procedural formality but can serve as a proactive shield against unforeseen challenges and risks. One essential aspect of the legal due diligence process is reviewing third-party contracts to which the target entity is party, in order to better understand the scope of its commercial relationships and to anticipate any issues that may arise via the underlying contractual relationships as a result of completing the proposed M&A transaction.

A frequent reality in many M&A transactions is the requirement to obtain consents from third parties upon the "change of control" of the target entity and/or the transfer or assignment of a third-party contract to which the target is party. Notwithstanding the wording of such contracts, in many instances, the business team from the purchaser will often ask the question: "When is consent actually required?" While anti-assignment and change of control provisions are fairly ubiquitous in commercial contracts, the same cannot be said for when the requirement to obtain consent is actually triggered. The specifics of the proposed transaction's structure will often dictate the purchaser's next steps when deciding whether the sometimes-cumbersome process of obtaining consents with one or multiple third parties is actually needed.

This article examines what anti-assignment provisionsare and how to approach them, depending on the situation at hand, including in the context of transactions where a change of control event may be triggered. This article also discusses how to interpret whether consent is required when faced with an anti-assignment provision which states that an assignment, including an assignment by operation of law , requires consent from the non-assigning party.

Understanding Anti-Assignment Provisions

Generally, an anti-assignment provision prohibits the transfer or assignment of some or all of the assigning party's rights and obligations under the contract in question to another person without the non-assigning party's prior written consent. By way of example, a standard anti-assignment provision in a contract may read as follows:

Company ABC shall not assign or transfer this agreement, in whole or in part, without the prior written consent of Company XYZ.

In this case, Company ABC requires Company XYZ's prior written consent to assign the contract. Seems simple enough. However, not all anti-assignment provisions are cut from the same cloth. For example, some anti-assignment provisions expand on the prohibition against general contractual assignment by including a prohibition against assignment by operation of law or otherwise . As is discussed in greater detail below, the nuanced meaning of this phrase can capture transactions that typically would not trigger a general anti-assignment provision and can also trigger the requirement to get consent from the non-assigning party for practical business reasons.

To explore this further, it is helpful to consider anti-assignment provisions in the two main structures of M&A transactions: (i) asset purchases and (ii) share purchases.

Context of M&A Transactions: Asset Purchases and Share Purchases

There are key differences between what triggers an anti-assignment provision in an asset purchase transaction versus a share purchase transaction.

i) Asset Purchases

An anti-assignment provision in a contract that forms part of the "purchased assets" in an asset deal will normally be triggered in an asset purchase transaction pursuant to which the purchaser acquires some or all of the assets of the target entity, including some or all of its contracts. Because the target entity is no longer the contracting party once the transaction ultimately closes (since it is assigning its rights and obligations under the contract to the purchaser), consent from the non-assigning party will be required to avoid any potential liability, recourse or termination of said contract as a result of the completion of the transaction.

ii) Share Purchases

Provisions which prohibit the assignment or transfer of a contract without the prior approval of the non-assigning party will not normally, under Canadian law, be captured in a share purchase transaction pursuant to which the purchaser acquires a portion or all of the shares of the target entity. In other words, no new entity is becoming party to that same contract. General anti-assignment provisions are not typically triggered by a share purchase because the contracts are not assigned or transferred to another entity and instead there is usually a "change of control" of the target entity. In such cases, the target entity remains the contracting party under the contract and the consent analysis will be premised on whether the contract requires consent of the third party for a "direct" or "indirect" change of control of the target entity and not the assignment of the contract.

Importantly, some anti-assignment provisions include prohibitions against change of control without prior written consent. For example, the provision might state the following:

Company ABC shall not assign or transfer this agreement, in whole or in part, without the prior written approval of Company XYZ. For the purposes of this agreement, any change of control of Company ABC resulting from an amalgamation, corporate reorganization, arrangement, business sale or asset shall be deemed an assignment or transfer.

In that case, a change of control as a result of a share purchase will be deemed an assignment or transfer, and prior written consent will be required.

A step in many share purchase transactions where the target is a Canadian corporation that often occurs on or soon after closing is the amalgamation of the purchasing entity and the target entity. So, what about anti-assignment provisions containing by operation of law language – do amalgamations trigger an assignment by operation of law? The short answer: It depends on the jurisdiction in which the anti-assignment provision is being scrutinized (typically, the governing law of the contract in question).

Assignments by Operation of Law

In Canada, the assignment of a contract as part of an asset sale, or the change of control of a party to a contract pursuant to a share sale – situations not normally effected via legal statute or court-ordered proceeding in M&A transactions – will not in and of itself effect an assignment of that contract by operation of law . 1

Still, one must consider the implications of amalgamations, especially in the context of a proposed transaction when interpreting whether consent is required when an anti-assignment provision contains by operation of law language. Under Canadian law, where nuances often blur the lines within the jurisprudence, an amalgamation will not normally effect the assignment of a contract by operation of law . The same does not necessarily hold true for a Canadian amalgamation scrutinized under U.S. legal doctrines or interpreted by U.S. courts. 2

Difference Between Mergers and Amalgamations

As noted above, after the closing of a share purchase transaction, the purchasing entity will often amalgamate with the target entity ( click here to read more about amalgamations generally). When two companies "merge" in the U.S., we understand that one corporation survives the merger and one ceases to exist which is why, under U.S. law, a merger can result in an assignment by operation of law . While the "merger" concept is commonly used in the U.S., Canadian corporations combine through a process called "amalgamation," a situation where two corporations amalgamate and combine with neither corporation ceasing to exist. For all of our Canadian lawyer readers, you will remember the Supreme Court of Canada's description of an amalgamation as "a river formed by the confluence of two streams, or the creation of a single rope through the intertwining of strands." 3 Generally, each entity survives and shares the pre-existing rights and liabilities of the other, including contractual relationships, as one corporation. 4

MTA Canada Royalty Corp. v. Compania Minera Pangea, S.A. de C.V.

As a practical note and for the reasons below, particularly in cross-border M&A transactions, it would be wise to consider seeking consent where a contract prohibits assignment by operation of law without the prior consent of the other contracting party when your proposed transaction contemplates an amalgamation.

In MTA Canada Royalty Corp. v. Compania Minera Pangea, S.A. de C.V. (a Superior Court of Delaware decision), the court interpreted a Canadian (British Columbia) amalgamation as an assignment by operation of law , irrespective of the fact that the amalgamation was effected via Canadian governing legislation. In essence, the Delaware court applied U.S. merger jurisprudence to a contract involving a Canadian amalgamation because the contract in question was governed by Delaware law. This is despite the fact that, generally, an amalgamation effected under Canadian common law jurisdictions would not constitute an assignment by operation of law if considered by a Canadian court. As previously mentioned, under Canadian law, unlike in Delaware, neither of the amalgamating entities cease to exist and, technically, there is no "surviving" entity as there would be with a U.S.-style merger. That being said, we bring this to your attention to show that it is possible that a U.S. court (if the applicable third-party contract is governed by U.S. law or other foreign laws) or other U.S. counterparties could interpret a Canadian amalgamation to effect an assignment by operation of law . In this case, as prior consent was not obtained as required by the anti-assignment provision of the contract in question, the Delaware court held that the parties to that agreement were bound by the anti-assignment provision's express prohibition against all assignments without the other side's consent. 5

To avoid the same circumstances that resulted from the decision in MTA Canada Royalty Corp. , seeking consent where an anti-assignment provision includes a prohibition against assignment by operation of law without prior consent can be a practical and strategic option when considering transactions involving amalgamations. It is generally further recommended to do so in order to avoid any confusion for all contracting parties post-closing.

Practical Considerations

The consequences of violating anti-assignment provisions can vary. In some cases, the party attempting to complete the assignment is simply required to continue its obligations under the contract but, in others, assignment without prior consent constitutes default under the contract resulting in significant liability for the defaulting party, including potential termination of the contract. This is especially noteworthy for contracts with third parties that are essential to the target entity's revenue and general business functions, as the purchaser would run the risk of losing key contractual relationships that contributed to the success of the target business. As such, identifying assignment provisions and considering whether they are triggered by a change of control and require consent is an important element when reviewing the contracts of a target entity and completing legal due diligence as part of an M&A transaction.

There can be a strategic and/or legal imperative to seek consent in many situations when confronted with contractual clauses that prohibit an assignment, either by operation of law or through other means, absent the explicit approval of the non-assigning party. However, the structure of the proposed transaction will often dictate whether consent is even required in the first place. Without considering this nuanced area of M&A transactions, purchasers not only potentially expose themselves to liability but also risk losing key contractual relationships that significantly drive the value of the transaction.

1. An assignment by operation of law can be interpreted as an involuntary assignment required by legal statute or certain court-ordered proceedings. For instance, an assignment of a contract by operation of law may occur in, among other situations: (i) testamentary dispositions; (ii) court-ordered asset transfers in bankruptcy proceedings; or (iii) court-ordered asset transfers in divorce proceedings.

2. MTA Canada Royalty Corp. v. Compania Minera Pangea, S.A. de C.V ., C. A. No. N19C-11-228 AML, 2020 WL 5554161 (Del. Super. Sept. 16, 2020) [ MTA Canada Royalty Corp. ].

3. R. v. Black & Decker Manufacturing Co. , [1975] 1 S.C.R. 411.

4. Certain Canadian jurisdictions, such as the Business Corporations Act (British Columbia), explicitly state that an amalgamation does not constitute an assignment by operation of law (subsection 282(2)).

5. MTA Canada Royalty Corp .

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Assignment agreement

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About this deed of assignment

Use this deed of assignment to transfer one or more contracts between two parties where the agreement of the other original party is not needed.

Commonly, this assignment agreement would be used to transfer customer service contracts between businesses when one business buys the other, but it can be as easily applied to other uses. This is a simple yet comprehensive agreement that ensures a quick “handover” of a contract.

Also included with the deed of assignment is a letter template to send to customers informing them of the change.

Why a deed of assignment rather than an assignment contract

Our assignment agreement has been drawn as a deed rather than a contract. At law, a contract requires consideration (something in return for the assignment). A deed does not require consideration, so it is a more flexible way of achieving the same end.

When to use this deed of assignment

Assignment is an easy way of transferring a contract because it only requires the agreement of the original party to the contract and party taking on the rights and responsibilities. However, assignment is not always possible (some contracts have non-assignment clauses requiring all parties to the contract to agree).

You should use a novation agreement rather than a deed of assignment if all parties to the contract need to agree to the change and sign the deed. If in doubt, we recommend that you novate using: Novation agreement: transfer of service contract .

Agreement features and contents

• Suitable when either party is resident outside the Canada
• Ensures a legal transfer as it is drawn as an agreement between all parties
• Comprehensive provisions provide ideas for you to mould
• Letter to customers included so that you can ensure a successful future relationship with your new clients
• Suitable for all Provinces of Canada

The deed of assignment contains the following sections:

• Details of the parties
• The assignment
• Existing claims: sets out how outstanding claims will be dealt with
• Other usual legal provisions in plain English

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• MLA 8TH EDITION
• Baudouin, Jean-louis. "Contract Law in Canada". The Canadian Encyclopedia , 30 October 2020, Historica Canada . www.thecanadianencyclopedia.ca/en/article/contract-law. Accessed 01 July 2024.
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Contract Law in Canada

Article by Jean-louis Baudouin

Updated by Andrew McIntosh

Published Online February 6, 2012

Last Edited October 30, 2020

A contract is a legally binding agreement between two or more persons for a particular purpose. It is an instrument for the economic exchange of goods and services. In Canada, contract law is administered both in common law and, in Quebec, civil law .

Economic Exchange

In general, contracts are always formed on the same pattern. A person offers to give another person something (for example: to deliver an item in return for a certain price); to provide a service (to work for a certain salary); or to refrain from doing something (not to compete for a period of time in return for compensation). If the offer is accepted, the contract is then valid in principle. A contract is, above all, an instrument for the economic exchange of goods and services.

Types of Contracts

The four most common types of contracts are:

• the contract of sale, whereby a person acquires the ownership of property in return for payment;
• the lease and hire of services, whereby a person offers his services to another in return for payment;
• the lease and hire of things, whereby a person is temporarily granted the use of property (e.g., an apartment) in return for a price (rent);
• and the mandate, whereby a person gives another the power to represent her.

Contracts Under Civil and Common Law

Unlike other agreements, a contract is a legally binding promise. If one of the parties fails or refuses to fulfil its promise without a valid reason recognized by law, the party suffering the consequence of this breach of promise may call upon the courts either to force the defaulting party to carry out its promise (specific performance) or to demand compensation in the form of damages.

Quebec civil law  and Canadian  common law  generally follow similar rules in this regard: a contract legally entered into represents a legal bond between the parties. Parties are free to contract whenever and for whatever reason they wish. The only limits to absolute contractual freedom are certain restrictions imposed by legislation and by accepted ethics . Contracts contrary to a statutory law such as the Canadian  Criminal Code  are null and void. (Examples of this might include a work contract for a professional killer, or for a sex trade worker ). The same is true for a contract that goes against accepted ethics; or in civil law, public order.

Civil Code  regulations governing contracts in Quebec (articles 1377, 1456 of the  Québec Civil Code  – QCC) are derived mainly from French civil law. (French civil law is sourced from Roman law.) In other provinces, regulations governing contracts are based mostly on jurisprudence (previous court decisions) and on traditional British common law.

Many provinces, however, have adopted legislation codifying the rules of certain contracts. This is particularly true of sales and consumer contracts. Although Canada’s two major legal systems differ in certain respects for contract law, the practical solutions they provide are very similar when not identical.

For a contract to be valid and therefore legally binding, five conditions must be met. First, there must be the mutual consent of both parties. No one can be held to a promise involuntarily made. When consent is given by error, either under physical or moral duress, or as a result of fraudulent practices, the contract may be declared null and void at the request of the aggrieved party. In certain types of contractual relationship, the law demands that the consent of the party be both free and informed. This is the case, for instance, with contracts involving medical treatment.

The second is contractual capacity — the mental ability to keep the promise one has made. A young child, a person suffering from a serious mental disorder, and in some cases a minor are all considered incapable of contracting.

The third condition is that the contract should have an object or a purpose. It must concern a specific and agreed-upon good or service.

The fourth condition is “lawful cause” in  civil law ; or a “valuable consideration” in  common law . In this area, important technical differences exist between the two legal systems. Briefly, according to this fourth condition, the promise made must be serious and each obligation assumed by one of the parties must find a corresponding (but not necessarily equivalent or equal) promise made by the other party. A person may thus legally sell goods at a price that does not represent their actual market value. The contract would still be a valid one.

The fifth condition, which is not required in all cases, is the compliance in certain circumstances to formalities provided by law , such as a valid written instrument. In general, this condition holds for contracts that may have serious consequences for the parties; or those for which certain measures of publicity are required.

Parties to a valid contract are always bound by law to carry out their promise. Should they fail to, the other party is free to go to court to force them to comply. At times, the court may order the defaulting party to do exactly what he had promised (specified promise). In that respect, civil law provides more readily for the forced execution of promises than common law, for which specific performance appears to be still an exception to the rule. ( See also   Torts in Canada ;  Law of Delict in Québec .)

Courts may also award financial compensation in the form of damages equal in value to the loss suffered and profits lost as a result of the breach of contract; however, this loss and profit must be directly related to the non-fulfillment of promise (article 1611 QCC). Furthermore, courts award only damages equivalent to those benefits that the parties might reasonably have expected to receive at the time the agreement was made.

The rapid increase of class actions both in contractual and delictual fields has had a significant impact on the amount of damages awarded by courts; in certain cases, the amount can reach millions of dollars.

Consumer Protection and Good Faith

Increasingly, provincial and federal legislatures are acting to protect citizens against certain abusive commercial practices. Consumer protection law , in which rules and standards are imposed to suppress fraud , to avoid forced sales and to protect the consumer against dishonest practices, is an example of this type of action. The Quebec Civil Code  has provisions concerning performance in good faith (article 1375 QCC), as well as abusive, illegible or incomprehensible clauses (article 1379 QCC). These go a long way to promote fairness in contractual relationship.

In recent years, good faith has played an increasingly important role in  Quebec  case law. In other provinces, a recent judgement of the  Supreme Court of Canada  has also set a new requirement of good faith in contractual matters, but in limited circumstances.

See also Landlord and Tenant Law ; Employment Law ; Torts in Canada ; Restitution ; Insurance .

• legal system
• Criminal Code

Further Reading

John McCamus, The Law of Contracts , 2nd ed. (2013).

• Angela Swan, Jukab Admaski and Annie Y. Na, Canadian Contract Law , 4th (2018).

Recommended

Law of evidence.

Constitutional Law

Family law in canada, landlord and tenant law, employment law, torts in canada, restitution (legal).

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[Free Assignment Agreement Documents]

Canadian Assignment Agreement

This document is up to date! It was last reviewed by a lawyer in June 2024 .

This agreement is used when one party (the assignor) agrees to assign a contract, or the rights in a contract, or another income/object to a second party (the assignee). In exchange for the assignment, the assignee may give the assignor money or personal property, or forgive a debt or obligation.

Simply answer the questions below to personalize your Assignment Agreement

This legal document is also known as:

This form also known as: contract assignment agreement, transfer contract rights form, assignment of cntractural rights

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Below are some random samples we have created with Documatica. Please note that these documents reflect a certain set of answers, and it is very likely that the document you require is different. Do not rely on the templates below - create your own customized Assignment Agreement with our webpage.

Assignment Agreement (Canadian) Sample 27MvmS1.pdf

For maximum legal protection, obtain a lawyer reviewed Assignment Agreement directly from us .

Assignment of Contracts: What consumers should know

By Amanda McKellar | February 17, 2016

Recent media reports in British Columbia have brought property assignment, also called “shadow flipping,” into the public conversation.

At its most basic, contract assignment is when a property buyer assigns their interest in the purchase to a second buyer before the original sale to the first buyer closes. The original seller thinks they are selling to the first buyer, but a second buyer has already agreed to buy the property from the first buyer, usually for a higher price. This means the seller doesn’t get as much money as they could for their property.

Property assignment is not illegal, but we understand consumers may be concerned about these activities because of the media reports.

The situation is different in Alberta. Property assignment is typically more common in rising markets and where there is a significant influx of foreign money; such as in B.C. Alberta is experiencing a different economic situation. RECA has not received any complaints about assignments/shadow flipping as being reported in B.C. right now.

Assignment of Contracts: What should consumers know?

1. Property assignment is not illegal, nor is flipping a property.

While we don’t have all the facts about the B.C. cases, it sounds like real estate professionals themselves are involved in the transactions and are financially benefiting from assignments. They are buying properties from unrepresented sellers and re-selling the properties through an assignment to a second buyer for a higher price before the first deal closes.

This is technically legal, but the real estate professional must disclose the assignment to the original seller.

2. Alberta has robust rules in place relating to personal trades in real estate, disclosure, and fulfilment of fiduciary duties. When real estate professionals have a direct or indirect interest in a real estate transaction, they are required to disclose it, in writing, to an unrepresented buyer or seller. They also need to disclose the complete details of any negotiations for a further trade to another person or of the professional’s interest in the property.

For example, if you are an unrepresented seller and a real estate professional is buying your home, and that real estate professional has already negotiated the sale of your property to another buyer in the future, the real estate professional must disclose the details of that transaction in writing to the original seller, you.

Alberta real estate professionals owe their clients fiduciary duties, including undivided loyalty to their client, acting in the best interest of their client at all times, and avoiding and disclosing all conflicts of interest.

It is inappropriate for an industry professional to approach you as a potential seller and ask you to sign a Seller Representation Agreement for the purpose of enabling one of their buyer clients to buy your property. In these cases, industry professionals should use a Seller Customer Acknowledgement and Fee Agreement form. This form outlines their role, including the fact they are not representing you or your best interests; they are representing the buyer.

Not only do Alberta real estate professionals have to disclose the conflict of interest, they also have a fiduciary duty to avoid conflicts of interest from the outset.

3.Know the value of your home. RECA encourages consumers to do their due diligence before putting their property on the market, and hire a:

• licensed real estate licensee to represent your interests. They can prepare a comparative market analysis that provides you with sold prices for similar properties, not just the asking prices. They will also work in your best interests.

We believe a well-informed consumer is a protected consumer. RECA and Alberta licensed licensee offer a number of resources that can help.

For more information, check out RECA’s additional Consumer Information:

Real Estate Consumer Information

Unrepresented Sellers – What You Need to Know

Real Estate Professionals Buying Your House or Selling You Theirs

Estimating the Market Value of Your Home

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Assignment of Contract

Jump to section, what is an assignment of contract.

An assignment of contract is a legal term that describes the process that occurs when the original party (assignor) transfers their rights and obligations under their contract to a third party (assignee). When an assignment of contract happens, the original party is relieved of their contractual duties, and their role is replaced by the approved incoming party.

How Does Assignment of Contract Work?

An assignment of contract is simpler than you might think.

The process starts with an existing contract party who wishes to transfer their contractual obligations to a new party.

When this occurs, the existing contract party must first confirm that an assignment of contract is permissible under the legally binding agreement . Some contracts prohibit assignments of contract altogether, and some require the other parties of the agreement to agree to the transfer. However, the general rule is that contracts are freely assignable unless there is an explicit provision that says otherwise.

In other cases, some contracts allow an assignment of contract without any formal notification to other contract parties. If this is the case, once the existing contract party decides to reassign his duties, he must create a “Letter of Assignment ” to notify any other contract signers of the change.

The Letter of Assignment must include details about who is to take over the contractual obligations of the exiting party and when the transfer will take place. If the assignment is valid, the assignor is not required to obtain the consent or signature of the other parties to the original contract for the valid assignment to take place.

Check out this article to learn more about how assigning a contract works.

Contract Assignment Examples

Contract assignments are great tools for contract parties to use when they wish to transfer their commitments to a third party. Here are some examples of contract assignments to help you better understand them:

Anna signs a contract with a local trash company that entitles her to have her trash picked up twice a week. A year later, the trash company transferred her contract to a new trash service provider. This contract assignment effectively makes Anna’s contract now with the new service provider.

Hasina enters a contract with a national phone company for cell phone service. The company goes into bankruptcy and needs to close its doors but decides to transfer all current contracts to another provider who agrees to honor the same rates and level of service. The contract assignment is completed, and Hasina now has a contract with the new phone company as a result.

Here is an article where you can find out more about contract assignments.

Assignment of Contract in Real Estate

Assignment of contract is also used in real estate to make money without going the well-known routes of buying and flipping houses. When real estate LLC investors use an assignment of contract, they can make money off properties without ever actually buying them by instead opting to transfer real estate contracts .

This process is called real estate wholesaling.

Real Estate Wholesaling

Real estate wholesaling consists of locating deals on houses that you don’t plan to buy but instead plan to enter a contract to reassign the house to another buyer and pocket the profit.

The process is simple: real estate wholesalers negotiate purchase contracts with sellers. Then, they present these contracts to buyers who pay them an assignment fee for transferring the contract.

This process works because a real estate purchase agreement does not come with the obligation to buy a property. Instead, it sets forth certain purchasing parameters that must be fulfilled by the buyer of the property. In a nutshell, whoever signs the purchase contract has the right to buy the property, but those rights can usually be transferred by means of an assignment of contract.

This means that as long as the buyer who’s involved in the assignment of contract agrees with the purchasing terms, they can legally take over the contract.

But how do real estate wholesalers find these properties?

It is easier than you might think. Here are a few examples of ways that wholesalers find cheap houses to turn a profit on:

• Direct mailers
• Place newspaper ads
• Make posts in online forums
• Social media posts

The key to finding the perfect home for an assignment of contract is to locate sellers that are looking to get rid of their properties quickly. This might be a family who is looking to relocate for a job opportunity or someone who needs to make repairs on a home but can’t afford it. Either way, the quicker the wholesaler can close the deal, the better.

Once a property is located, wholesalers immediately go to work getting the details ironed out about how the sale will work. Transparency is key when it comes to wholesaling. This means that when a wholesaler intends to use an assignment of contract to transfer the rights to another person, they are always upfront about during the preliminary phases of the sale.

In addition to this practice just being good business, it makes sure the process goes as smoothly as possible later down the line. Wholesalers are clear in their intent and make sure buyers know that the contract could be transferred to another buyer before the closing date arrives.

After their offer is accepted and warranties are determined, wholesalers move to complete a title search . Title searches ensure that sellers have the right to enter into a purchase agreement on the property. They do this by searching for any outstanding tax payments, liens , or other roadblocks that could prevent the sale from going through.

Wholesalers also often work with experienced real estate lawyers who ensure that all of the legal paperwork is forthcoming and will stand up in court. Lawyers can also assist in the contract negotiation process if needed but often don’t come in until the final stages.

If the title search comes back clear and the real estate lawyer gives the green light, the wholesaler will immediately move to locate an entity to transfer the rights to buy.

One of the most attractive advantages of real estate wholesaling is that very little money is needed to get started. The process of finding a seller, negotiating a price, and performing a title search is an extremely cheap process that almost anyone can do.

On the other hand, it is not always a positive experience. It can be hard for wholesalers to find sellers who will agree to sell their homes for less than the market value. Even when they do, there is always a chance that the transferred buyer will back out of the sale, which leaves wholesalers obligated to either purchase the property themselves or scramble to find a new person to complete an assignment of contract with.

Learn more about assignment of contract in real estate by checking out this article .

Who Handles Assignment of Contract?

The best person to handle an assignment of contract is an attorney. Since these are detailed legal documents that deal with thousands of dollars, it is never a bad idea to have a professional on your side. If you need help with an assignment of contract or signing a business contract , post a project on ContractsCounsel. There, you can connect with attorneys who know everything there is to know about assignment of contract amendment and can walk you through the whole process.

ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.

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Background in Engineering, Masters in Business, Licensed Patent Attorney. Reviewed countless title reports, and land contracts. If you have a problem with Real Estate I can solve it.

I have been in business development for 15 years before becoming an attorney. As an attorney, I help companies navigate legal challenges that they face.

Anthony M. Verna III, is the managing partner at Verna Law, P.C. With a strong focus on Trademark, Copyright, Domain Names, Entertainment, and Advertising law, Verna Law, P.C. strives to provide all Intellectual Property services a modern business of any size may need to market and promote itself better. From the very early concept stage, Verna Law, P.C. can conduct a comprehensive, all-encompassing search and analysis on any proposed trademark to head off complications. Once the proposed concept enters the Alpha stage, Verna Law, P.C. can seamlessly switch to handling registration, protection, and if needed, defense of registered trademarks, copyrights, and domain names, as well as prosecution of entities violating said rights. Verna Law, P.C. also provides intellectual property counseling and services tailored to fit into your business’ comprehensive growth strategy. This shows as many of Verna Law, P.C.’s clients are international: from China, the United Kingdom, Canada, and Germany, Verna Law’s reach is worldwide. Additionally, Verna Law, P.C., can handle your business’ Entertainment and Advertising law needs by helping your business create advertising and promotions that keep competitors and regulators at bay. Located in the shadow of New York City, Verna Law, P.C. has a global reach that will provide clients with the most vigorous Intellectual Property advocate available. Anthony M. Verna III is a member of the New York and New Jersey Bars, as well as the U.S. District Court Southern District of New York. He is a sought-after business speaker, including regular appearances at the World Board Gaming Championships, Business Marketing Association of New Jersey, and Columbian Lawyers Association.

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How to Negotiate and Draft a Contract in Canada

In the realm of legal agreements, contracts are the fundamental building blocks that define and protect the rights and interests of all parties involved. They are necessary in many aspects of life, be it business arrangements, property leases, or employment agreements. The capacity to negotiate and draft an effective contract is an indispensable skill in Canada, ensuring your interests are safeguarded and preventing potential misunderstandings or legal disputes. This article delves deeper into the process of contract creation, with a particular emphasis on employment contracts.

The Fundamentals of Contracts

In the Canadian legal system, a contract represents a legally enforceable agreement between two or more parties, setting the terms and conditions for their specific transaction or relationship. Whether it’s about the provision of goods or services, rental of property, or the terms of employment, a contract is an assurance that all parties will adhere to the agreed-upon stipulations.

A well-drafted contract should embody clarity, specificity, fairness, and full compliance with all relevant laws and regulations in Canada. These elements not only protect the involved parties from potential legal disputes but also facilitate smoother transactions and relationships.

The Vital Role of Negotiation

Negotiation is a cornerstone of any contract formation. This collaborative process allows all parties to express their expectations, needs, and boundaries, leading to mutually beneficial terms. Successful negotiation demands open communication, willingness to compromise, and mutual respect among all parties. Each negotiation stage should strive for a ‘win-win’ outcome, ensuring all parties feel satisfied with the agreement.

Drafting a Contract: Details Matter

The task of drafting a contract is about translating the agreed-upon terms into a formal written document. While the contract’s specifics can vary depending on the purpose, a well-drafted contract must contain:

• Identification of Parties: The contract should clearly and accurately identify all parties involved.
• Terms and Conditions: The core of the contract, these outline the agreed-upon conditions for the agreement.
• Obligations and Responsibilities: This section delineates the duties each party must perform under the contract.
• Termination Clause: The contract should specify the conditions under which it can be terminated, providing clear guidance if the agreement needs to end.

Legal Professionals: Guides in the Process

Legal professionals are invaluable assets in the contract drafting and negotiation process. They can provide informed advice on legal stipulations, ensure contracts are enforceable and well-drafted, and aid in negotiation. A useful resource like the paralegal directory Ontario can aid in finding a suitable legal professional in your vicinity.

The Final Stages: Review and Signature

After drafting the contract, all parties must review it meticulously to ensure it reflects the negotiated terms accurately. Any discrepancies should be addressed and rectified. Once all parties are satisfied, they can sign the contract, making it a legally binding document.

Negotiating and drafting contracts is an intricate process, more so for employment contracts. It requires a thorough understanding of legal principles, preparation, and the readiness to engage professional assistance. While this article provides a detailed guide, it’s crucial to remember that laws can vary across provinces in Canada. Therefore, understanding the laws applicable in your specific context is vital. When in doubt, always seek the advice of a legal professional.

Employment Contracts in Canada

Employment contracts in Canada serve a vital role in formalizing the relationship between an employer and an employee. They meticulously detail several essential aspects such as obligations, compensation, working hours, and conditions for termination. However, contracts can vary based on the nature of employment. Understanding these variations is crucial when negotiating fair contracts. Below, we explore various types of employment contracts in Canada and special considerations for remote work.

1. Full-Time Employment Contracts

A full-time employment contract is typically used for permanent positions where the employee is expected to work a full set of hours as defined by the employer, usually 35-40 hours per week. These contracts include details about the job role, salary, benefits like health insurance, vacation and sick leave policies, and termination clauses.

2. Part-Time Employment Contracts

A part-time employment contract is designed for workers who are employed for fewer hours than the standard full-time workweek. These contracts should specify the number of working hours, work schedule, wage rate, and prorated benefits, if any.

3. Fixed-Term Contracts

Fixed-term or temporary contracts are used for employment that is expected to end after a specific period. This could be seasonal work or a job covering for another employee on leave. These contracts must specify the duration of employment and the conditions under which the contract could be terminated prematurely.

4. Casual Employment Contracts

Casual contracts are generally for irregular work where the employer is not obliged to provide work, and the employee is not required to accept any work offered. These contracts should clarify the nature of the casual arrangement and how work will be offered and accepted.

5. Independent Contractor Agreements

Independent contractors are not employees, but the terms of their services are often outlined in a contract. These contracts should detail the nature of the work to be done, payment, duration of the agreement, and clearly state the contractor is not an employee to avoid potential disputes about employee rights and benefits.

6. Remote Work Agreements

In the age of digital communication, remote work is becoming increasingly common, necessitating specific considerations in employment contracts. These contracts should address work hours, data security, provision of necessary equipment, compensation for work-related expenses, and workspace requirements.

Employment law considerations for remote worker are especially relevant here as remote work can blur boundaries around work hours and health and safety obligations. Employers should make sure their remote work.

Whether dealing with business arrangements, property leases, or navigating the intricacies of employment contract negotiations in Canada , mastering the art of contract creation is crucial. This skill safeguards your interests, averts misunderstandings, and helps prevent potential legal disputes. Being well-informed about industry standards, and showing openness and willingness to compromise are vital during these negotiations. An employment lawyer near you can provide invaluable assistance throughout the process, ensuring that every contract, particularly employment ones, is fair, comprehensive, and legally compliant. An informed, careful approach is key in fostering strong professional relationships and maintaining a productive working environment, whether you’re engaging in traditional or remote work agreements.

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By: Warren H.O. Mueller, B.A., LL.B., LL.M., Q.C. of the Ontario Bar, and D. Morgan, B.A., LL.B, LL.M.

I: Basis of Contract

Click   HERE   to access the CED and the Canadian Abridgment titles for this excerpt on WestlawNext Canada

I.1: Contract Defined

See Canadian Abridgment: CON.I.1 Contracts — Nature of contract — What constitutes contract

A contract is a legally recognized agreement between two or more persons which gives rise to an obligation that may be enforced in the courts. More comprehensively, a valid and operative contract may be defined as an agreement free from vitiating factors such as mistake or misrepresentation, and constituted by the unconditional acceptance of an outstanding offer involving a reasonably precise and complete set of terms between two or more contractually competent parties, who intend to create mutual and reciprocal rights and duties that may be the subject of judicial sanction, if they are expressed in any required form, and are free from the taint of illegality or immorality, and are not subsequently discharged by law, by agreement, by breach, or by sufficient supervening circumstances.

I.2: Consensus Ad Idem

See Canadian Abridgment: CON.III.1 Contracts — Formation of contract — Consensus ad idem

Since mutuality lies at the root of any legally enforceable agreement, a contract requires a meeting of the minds of the parties on all essential matters relating to it (consensus ad idem). However, rather than trying to find the real subjective intention of each party, the courts have generally applied the dispassionate and objective test of the reasonable man. Therefore, whatever a party’s real intention may be, if he or she acts in such a way that a reasonable person would believe that the party was assenting to the terms proposed by the other party, and if the other party, upon that belief, enters into an agreement with him or her, an enforceable contract will come into effect. For a contract to be binding, the parties must come to the same determination, which must be disclosed by written or spoken words, or by some other signification of intention from which an implication of law, or an inference of fact, or both, may arise. In conclusion, the law of contract describes the formation of a contract in terms of rules that order and define the process of contract formation. A contract does not exist until there has been a definite offer and an unqualified and unconditional acceptance of the offer communicated to the offerer. There is also a general rule, however, that a court should interpret a contract, if possible, so as to make it work.

Similarly, whether a statement is to be construed as an offer capable of direct acceptance to form a contract depends upon a reasonable, objective interpretation of the words used.

Occasionally, however, a court’s equitable jurisdiction may be exercised to permit a more subjective assessment of the circumstances of the case. The existence and/or contents of the contract in such cases may be determined by reference to a party’s subjective belief, rather than by reference to the understanding of the reasonable person.

In determining whether the parties have reached agreement for legal purposes, the starting point must be the alleged contract itself. If there is a written contract whose wording reveals a plain and unambiguous intention, that will ordinarily be the end of the matter. But where it is unclear whether or not the parties have in fact agreed, the court may resort to evidence beyond the contractual language, including the factual matrix in existence at the relevant time and the genesis and aim of the transaction. The conduct of the parties during and subsequent to the purported making of a contract is also admissible to determine whether they did in fact make a binding contract, and, if they did, what the contractual terms were.

The absence of real consent to a contract apparently complete and binding may be shown to have resulted from mistake, fraud, or mental incapacity.

An agreement by a husband to remove the religious barriers to remarriage by providing a get or Jewish divorce is consistent with public order and harmonizes Canada’s approach to religious freedom, equality rights, divorce and remarriage generally. Thus, the contractual obligation contained in the agreement is valid and legally binding. The fact that a consent has religious elements does not thereby immunize it from judicial scrutiny.

The burden of proving a consensus between the parties is upon the party seeking to prove its existence, on a balance of probabilities.

I.3: Uncertainty and Incompleteness of Terms

See Canadian Abridgment: CON.III.1.b Contracts — Formation of contract — Consensus ad idem — Certainty of terms

Even when parties intend to contract, the essential terms of the bargain must be agreed and possess a sufficient degree of clarity before a legally binding agreement can be said to exist. Where, therefore, an agreement is incomplete because essential provisions have not been settled, or the agreement is too general or uncertain to be valid in itself, or the understanding of the parties is that their legal obligations are to be deferred until a formal contract has been executed, no binding contract will have been created, even if the parties may have thought they were bound. In such circumstances, the purported contract is often characterized as a mere “agreement to agree” or an agreement to negotiate, which is not legally enforceable. Where, on the other hand, the parties have settled all disputed primary terms and expressed their agreement with sufficient reasonable certainty to allow the court to give it practical meaning, their agreement will bind them, even if a formal written document is thereafter to be prepared and signed.

Although uncertainty and incompleteness are distinct conceptual notions, their application in contract law is often intermingled. Incompleteness refers to parties failing to indicate adequately by their words or actions, objectively determined, that they have completed an agreement. Uncertainty, on the other hand, presupposes that the parties have in principle reached an agreement, but it is impossible for the court, within the rules of evidence, to give any clear or substantial meaning to their bargain. In practical terms, both uncertainty and incompleteness create problems regarding enforceability, since a court cannot make a contract for the parties where they have not sufficiently indicated what their intentions and expectations are.

Accordingly, the failure of contracting parties to agree on one or more essential terms will prevent the creation of a binding contract. Further, the terms agreed upon must be clear and certain, in the sense that they must either be stated with reasonable specificity, or be reasonably ascertainable by application of an agreed formula, method, or principle of determination. Specificity is particularly important in regard to terms of payment, although promises to pay money or perform services “when able to do so” have generally been treated as enforceable. It is permissible, however, to leave for determination during the course of performance of a contract, insignificant details necessarily incidental to the carrying out of the work involved. And the fact that the parties fail to reach agreement on a severable and collateral aspect of their negotiations will not preclude enforcement of a concluded agreement with respect to transfer of an interest in property.

The courts have consistently maintained that they will not supply essential terms necessary to convert a mere “agreement to agree” into a concluded contract, even if the parties themselves believe that they have made an enforceable contract. Similarly, the presence of particularly vague primary terms will preclude the finding of an enforceable contract.

Notwithstanding, where a completed contract exists, but ambiguity remains in what the parties have purportedly agreed upon, some lack of clarity will not necessarily render the “agreement” unenforceable. Courts will strive to give effect to the reasonable expectations of the parties, objectively determined, where it is apparent that they intended some legal relationship to exist between them. Some courts have asserted that a contract will be rendered unenforceable only where a missing term is so essential that the court cannot collect the real intentions of the parties from the language within the four corners of the instrument without it, and so give effect to such intentions by supplying anything necessarily to be inferred. The principles of construction of contracts should be applied liberally to give legal effect to a clause in an agreement if the words used can be given a plain and ordinary meaning that is not in conflict with the agreement as a whole. This is particularly so where the precise nature of what are usually subsidiary or minor (that is, non-essential) contractual terms is in issue, or where there has been partial performance of the agreement. Lastly, it is not for a court to fill in essential terms in an otherwise incomplete agreement.

One means of giving effect to the parties’ contractual intentions is the judicial technique of implying terms to flesh out the agreement in order to give it business efficacy. However, it will be necessary for a court to define the nature of any implied terms with particularity only where there is a live issue and specific facts before it whose effect depends on that aspect of the agreement; otherwise, the court may simply satisfy itself that the absence of an express provision is not such an obstacle to the proper operation of the agreement as to render it unenforceable. Remaining issues of interpretation can be reasonably resolved at a subsequent time by employing the ordinary tools of documentary construction available to the courts.

A reference to the “usual terms” of a particular type of contract has often been sufficient to render a contract binding. Subsequent correspondence may clarify uncertainties in an agreement. A meaningless clause can often be ignored.

The plaintiff has the burden of showing that the contract is so unambiguous that the defendant will not be permitted to set up an alleged misunderstanding. The court must be satisfied with some degree of confidence on an objective basis that it can clearly identify the terms on which the parties have agreed. An agreement to agree does not constitute an enforceable agreement.

I.4: Necessity for Formal Written Contract

Where a tentative agreement is reached as a result of negotiations conducted orally or by correspondence, whether the creation and execution of a formal contractual document embodying the entire agreement is a condition precedent to the formation of a binding contract, or only an unessential means of recording an already concluded contract, depends on the intention of the parties. In practical terms, this depends primarily upon whether or not agreement has been reached on all of the essential terms of the contract.

Certain phrases, such as “subject to contract”, are strong indicia of an intention to have the creation of a contract conditional upon execution of a formal document. However, a document that clearly records all essential terms, even though “subject to” formalization, may signify that solicitors’ approval of its terms is not contemplated as a contractual pre-condition. While a long course of negotiations involving numerous counter-offers increases the likelihood of the court deciding that the parties did not intend to bind themselves without executing a formal document, continuation of negotiations after an agreement has apparently been reached do not necessarily indicate that no contract was concluded. Parties’ retainer of solicitors to assist in negotiating a complex commercial agreement is indicative of an intention not to be bound without execution of a formal written contract. Tentative acceptance subject to a condition, such as approval by senior management, is not binding unless the condition is satisfied.

Where a putative agreement exists in a series of communications between the parties, rather than in a formal note or memorandum signed as evidence of a contract, then everything that has passed between the parties in relation to the agreement should be considered when deciding whether or not a binding contract was made. Bare language phraseology (for example, “confirming verbal understandings”; “points discussed are”) may disclose an absence of the firmness of settled obligations. The conduct of the parties in carrying out an informal agreement in accordance with its terms is a strong indication that the execution of a formal document was not a condition precedent to the creation of a binding contract on the stipulated term, or that the parties have waived such a requirement. Even conduct after a dispute as to whether an agreement was reached may be useful in resolving the issue.

An incomplete antecedent agreement may be looked to as a foundation for a subsequent, more complete arrangement. Where terms are left uncertain after an oral discussion, those terms can be subsequently made certain by further discussions and through draft agreements.

An action for failure to execute an agreement will not lie if the agreement to be executed has never been reduced to writing. In order to prove a party in default of an obligation to execute a formal contract document, the document must have been submitted to the party for signature or, alternatively, the party must be shown to have given an unequivocal refusal to execute any such document. The reasonableness of a person’s refusal to sign a document upon whose execution creation of a contract depends will not be reviewed by the court. However, refusal of a party to execute a document merely reciting the terms of an already concluded agreement leaves that party open to an action for specific performance.

I.5: Intention to Create Legal Obligations

As between conscious parties, competent in law to engage in contractual relations, a contract can only come into existence if there is an intention to make a legally binding agreement.

In the case of a family or household agreement, or an agreement made on the basis of friendship, as distinct from business matters, the usual presumption is that the parties do not intend that the agreement be attended by legal consequences. Even in the case of a business agreement, however, if the parties do not intend that their agreement shall give rise to legal relations, but prefer to rely on mutual good faith and honour to the exclusion of legal remedies, no enforceable contract will result. The conduct of the parties may be examined to see if they intended their arrangement to have legal consequences. But when parties do intend to create enforceable obligations, they cannot completely exclude resort to the courts as a mechanism for resolving disputes.

I.6: Duty to Negotiate in Good Faith

See Canadian Abridgment: CON.III.1.a Contracts — Formation of contract — Consensus ad idem — General principles

In the absence of a special relationship, the common law generally has not recognized an independent duty between parties acting at arm’s length to negotiate in good faith in ordinary commercial transactions. Traditionally, courts have reasoned that agreements to negotiate in good faith, like agreements to negotiate simpliciter, are rendered legally unenforceable by uncertainty where they leave essential terms to be agreed upon in the future. Agreements to negotiate in good faith have been regarded as virtually impossible to judicially enforce, either because a party who has not committed to arrive at a concluded agreement bears no obligation respecting the ultimate conclusion of the negotiations, or because such agreements often lack an objective measure by which good faith may be assessed. Further, judges remain reluctant to impose a duty of care on a party to be mindful of another party’s legitimate interests during contractual bargaining, as it would defeat the essence of negotiation and hobble the marketplace. Notwithstanding this judicial caution toward a duty of good faith in pre-contractual settings, the doctrines of undue influence, economic duress, and unconscionability, as well as potential actions for negligent misrepresentation, fraud and the tort of deceit, remain available to provide protection to negotiating parties. There exists no duty of fairness in employment hiring situations. Lastly, any covenant to negotiate in good faith, as any other contractual obligation, must be interpreted in accordance with the intention of the parties in the context in which the agreement was negotiated and executed.

However, a duty to negotiate in good faith may operate in situations where a special relationship between the parties exists, based upon an inherent vulnerability or power imbalance between them, or arising ordinarily out of the nature of their relationship or the circumstances created by the other party. Special relationships that have given rise to a duty of good faith to negotiate include that of franchisor and franchisee, spouses entering into marriage contracts or separation agreements, insurer and insured, fiduciary relations, and tendering situations.

Some courts have found that an existing (and particularly, a long-standing) relationship between parties should give rise to a duty to negotiate in good faith by virtue of a special relationship or otherwise, although the weight of authority has generally drawn a line between pre-contractual negotiations and performance of an existing contract. A specified duty to negotiate in relation to collateral terms to an otherwise complete and binding contract may be legally enforceable. Parties to an oral contract or interim agreement may be impliedly obligated to negotiate, in good faith, further terms to be inserted in a final written agreement.

Where one party has incurred expenditures in the expectation of completing a contract in a situation where the other party has unreasonably withdrawn from negotiations, the restitutionary remedy of quantum meruit may arise on the basis of unjust enrichment.

II: Formation of Contract – Offer and Acceptance

II.1: Necessity for Offer and Acceptance

See Canadian Abridgment: CON.III.2 Contracts — Formation of contract — Offer; CON.III.3 Contracts — Formation of contract — Acceptance

A promise made under seal by one party becomes immediately binding without the necessity for acceptance by the other party, although that other party may avoid the contract by refusing to assent to the promise. In contrast, a contract not under seal can come into existence only as the result of an offer and its acceptance. It is often difficult to determine whether a communication made in the course of negotiations amounts to an offer or an acceptance.

In a bilateral contract, where both parties undertake obligations through an exchange of promises, acceptance generally occurs when the offeree communicates its counter-promise to the offeror. In a unilateral contract, however, one party makes a promise in return for the performance or forbearance of an act. This promise takes the form of an offer that can only be accepted by other party’s performing the specified act or forbearance. The other party’s performance provides the necessary consideration and allows him or her to enforce the original promise. The courts treat an offer as calling for bilateral, rather than unilateral, performance whenever the contract can fairly bear that construction.

A person who has made an offer cannot dispense with the necessity for acceptance in order to bind himself or herself contractually. Equally, a person’s actions in reliance on another person’s expressed intentions cannot amount to an acceptance capable of forming a contract where there is no offer capable of acceptance.

All essential terms must be accepted by both parties before a contract comes into being.

III: Consideration for Contract

III.1: General

See Canadian Abridgment: CON.IV.1 Contracts — Consideration — General principles

A simple contract not under seal requires consideration to support it in order to be legally binding. This means that each contracting party must exchange something of value, in the sense that the act or promise of one party must be "bought" or "bargained for" by the act or promise of the other. Hence, a gratuitous or voluntary promise or payment cannot be enforced or retained against its maker.

A contract under seal is binding without consideration, because either the formality of the sealing displaces the need for consideration, or the seal is treated as importing consideration. On the latter theory, however, it is possible for a party to assume the burden of proving that there was in fact no consideration and the contract is therefore unenforceable. In any event, a gratuitous promise under seal cannot be specifically enforced. While the mere presence in a contract of the phrase "signed, sealed and delivered" or similar language is often insufficient in itself to make the document a sealed instrument or deed, it may suffice if coupled with other indications of an intention to treat the document as sealed. Generally, some indication of a seal is required, and not merely an indication of where a seal should be placed. The contract form as a whole may indicate whether the parties intended it to be a sealed instrument.

A "mere" option (as opposed to an option under seal) is simply a promise whose binding effect depends on its having been given for consideration. The retention by one party of a unilateral right of rescission at any time results in the apparent agreement being illusory and, in fact, a mere option because of the absence of mutuality of obligation.

An acknowledgment of receipt of consideration can be rebutted by proof of the actual facts, whether the contract containing the acknowledgment is under seal or not. Similarly, the presumption that every party whose signature appears on a promissory note has received valuable consideration may be rebutted by the party alleging lack of consideration.

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6. Contract Law

Sample Contract Structure

Written contracts can be organized in many different ways. However, having a structure can help keep information organized, clear, and easy to find. The best contracts have clear headings that accurately describe what is contained in that section. Using emphasis, such as bold and underlining, work better than italics alone for capturing the reader’s eye.

In general, contracts often contain:

• Introduction of Parties and Purpose
• Definitions of Material Terms
• Covenants and Promises of Performance
• Breach and Its Consequences
• Representations and Warranties
• Procedure to Modify Contract
• Rights of Assignment and Delegation
• Alternative Dispute Resolution
• Choice of Law and Forum
• Integration
• Severability
• Exculpatory Clause
• Force Majeure
• Signature Block

Note that not all contracts will contain all these elements and provisions. The parties’ needs and the purpose of the contract determine the structure of the document.

Contracts have a title, often in bold or CAPITAL letters, at the top of the page. Titles should be as descriptive as possible. “Contract” or “Agreement” are not useful because they require the reader to read through the contract to know what it is about. The best contracts capture the nature of the document in the title. For example, “Employment Agreement Between Jane Doe and Queen’s University.”

Introduction of Parties and Purpose:

The introduction should name the parties and describe the nature of the contract. If background information is useful in explaining the parties’ interests and objectives, then it should be included here.

Definitions of Material Terms:

Most business contracts contain some definitions, unless the subject matter and parties are clear. Definitions are useful because it is an area readers can reference to ensure compliance with the contract. For example, did the seller provide the specific goods as defined by the contract?

Definitions are not necessary for every term, though. If not defined, legal terms are given their legal meaning. And ordinary words are given their common, ordinary meaning. Therefore, businesses should define the material terms of the transaction such as: goods, services, quantity, quality, and price. Definitions that are specific to the industry are also helpful to include.

Covenants and Promises of Performance:

A covenant is a formal promise to perform. This is the section of the contract where the parties state exactly how they will perform the contract. The Buyer will pay a specific amount for the goods while the Seller will deliver a specific item at a particular location. To ensure clarity, the best contracts use active verbs in this section. For example, “Buyer will pay Seller ten dollars.” It is clear who will be paying whom, and how much is owed. Passive voice injects ambiguity, which can be problematic. For example, “Seller shall be paid ten dollars.” Will Buyer pay Seller the money or will someone else tender payment? If payment is not made, is Buyer in breach of contract?

Conditions:

As discussed earlier, conditions are things that must occur before performance is due. Usually, conditions must be expressly stated in a contract to be legally enforceable. The best contracts identify any conditions and delineate a timeline for when performance is due after the condition is met. For example, if an inspection of a property is a condition of purchasing it, it is important to indicate the deadline by which the buyer must perform after the inspection is completed.

Breach and Its Consequences:

To constitute a violation of the contract, a breach must be material. A material breach is a substantial breach of contract that excuses aggrieved parties from further performance and affords them the right to sue for damages.

In contracts that require performance over a period of time, or payments in instalments, it is helpful to define what constitutes a material breach. This clarifies when the non-breaching party can seek a remedy. The best contracts anticipate reasons for breach and identify consequences for them.

An acceleration clause makes all future payments due immediately under the contract. Acceleration clauses often exist in contracts where periodic payments occur. For example, a contract to purchase a vehicle may require payment of all remaining money owed under the contract if the buyer misses a monthly payment. This allows the business that sold the vehicle or the bank that issued the loan to sue for breach of contract once, rather than filing a new lawsuit for each month.

A liquidated damages clause allows parties to determine the amount of damages in the event of a material breach. Agreeing to the value of the contract before any breach occurs often saves time and money should the case be litigated. To be enforceable, liquidated damages must apply to all parties equally, and be based on the value of the contract rather than acting as a penalty.

Representations and Warranties:

Representations are statements of fact made to induce someone to enter into a contract. Common representations by businesses include:

• They are properly licensed;
• They are insured;
• Their financial statements are accurate;
• They own all relevant assets;
• They have legal authority to enter into contracts.

Warranties in a contract are express promises that guarantee something in furtherance of the contract by one of the parties. For example, a seller warrants that the object being sold is as represented or promised.

Warranties differ from representations in four ways:

• A warranty is an essential part of a contract, while a representation is usually only a collateral inducement;
• A warranty is written in a contract; while a representation may be written or oral;
• A warranty is conclusively presumed to be material, while a representation must be proven to be material by the party claiming breach; and
• A warranty must be strictly complied with, while a representation must be substantially true.

Standard Provisions:

Modification:.

Often with contracts that require an extended period for performance, modification becomes a concern. What happens if prices or deadlines need to be altered? Will a new contract be required or can the existing contract be modified? Good contracts often include a procedure for how to modify a contract. This may be as informal as writing changes directly on the original contract with the parties’ initials and date. Or it could be through a formal addendum procedure.

Regardless of the chosen procedure, it is best practice for businesses to discuss modification procedures when entering into a contract. If the procedure is clear, less friction occurs when a party seeks modification.

Assignment and Delegation:

In general, parties are free to assign and delegate their rights and duties under a contract. Parties can limit those rights, or they can request notice if an assignment or delegation occurs. This is a provision that is often not needed unless a party has a concern about assignment, such as in the insurance industry.

Alternative Dispute Resolution:

As discussed earlier, many businesses want to reduce their risk of litigation by participating in alternative dispute resolution (ADR). Mandatory arbitration clauses are common in consumer and employment contracts. Before including an ADR provision in a contract, parties should be fully comfortable with the option that they choose. If a party agrees to mediation or arbitration, a court will enforce that choice even if the parties change their mind.

Choice of Law and Forum:

Choice of law provisions determine which province’s laws will be used to interpret the contract. Choice of forum provisions determine the province in which any litigation will take place. If the parties do not select that province’s law or location for litigation, the courts look to:

• Where the contract was signed;
• Where the contract is performed;
• Where the parties are residents; and
• The court’s jurisdictional rules.

Integration:

An integration clause is a provision stating that the contract represents the parties’ complete and final agreement and supersedes all informal understandings and oral agreements relating to the subject matter of the contract. In other words, it is the agreement. The purpose of an integration clause is to prevent the parties from later claiming that they agreed to additional or different terms than what the contract states. This means that any statements made before the parties signed the contract are not part of the contract and they will not be used to interpret the meaning of the contract.

Severability:

A severability clause is a provision that keeps the remaining provisions of a contract in force if any portion of the contract is declared unenforceable by the court. It is also known as a savings clause because it “saves” the whole contract from being declared unenforceable. For example, if a non-compete clause in an employment contract is declared unenforceable by a court, then the rest of the employment contract remains in effect.

Exculpatory Clause:

An exculpatory clause is a provision relieving a party from any liability resulting from a negligent or wrongful act. They are often employed when the risk of injury exists. Exculpatory clauses cannot limit liability when a party acts with gross negligence, commits an intentional tort, or when public policy or provincial laws prohibit them. Exculpatory clauses have been struck down by courts in some cases where parties to a contract have greatly unequal bargaining power, especially when the party with greater power acts unethically or with gross negligence.

Force Majeure:

A force majeure clause is a provision allocating risk to a certain party if performance becomes impossible as a result of an event that the parties could not have anticipated or controlled. Force majeure events are severe, disruptive events such as natural disasters, war, terrorist attacks, and fires. For example, if the subject matter of an international sales contract is destroyed by a hurricane, does the buyer or seller lose the money in the sale?

Signature Block Example:

For example, Ahmad’s Construction, LLC By: __________ Khalid Ahmad, President

Each person signing the contract should date it next to his or her signature.

For partnerships, only general partners can sign a contract on the partnership’s behalf. For corporations, the president or chief executive officer is presumed to have authority to sign. For an organization or association, a board president would have authority, but it may require a vote of the governing board to approve the contract.

Business Law and Ethics Canadian Edition Copyright © 2023 by Craig Ervine is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License , except where otherwise noted.

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Assigning Contracts in Canadian Insolvency Proceedings

Canadian restructuring and liquidation legislation provides struggling companies and bankruptcy trustees with powerful tools to restructure their affairs and maximize value for stakeholders. For example, in the right circumstances valuable contracts can be assigned, on notice to the counterparties, to buyers prepared to pay well for the rights conferred under the contracts. In such circumstances, the counterparty’s bargained for right to withhold its consent to an assignment can be effectively overridden by court order. The recent decision of the Supreme Court of British Columbia in Barafield Realty Ltd. v. Just Energy (B.C.) Limited Partnership highlights the importance of proper notice. [1]

The Barafield Realty Case

In Barafield Realty, the defendants acquired natural gas supply contracts pursuant to an asset purchase agreement entered into by the debtor in connection with its restructuring proceedings under the Companies’ Creditors Arrangement Act (“ CCAA “). [2] The contracts contained clauses that expressly prohibited assignment of the contracts without the consent of the counterparties. Other clauses permitted either party to terminate the contract upon the insolvency of the other party. The plaintiffs, who were counterparties to the contracts, were not given notice of the debtor’s CCAA proceedings or the acquisition of the contracts by the defendants. The consent of the plaintiffs was not obtained or even sought – perhaps as a result of the significant number of customer contracts at issue.

After the plaintiffs were informed of the assignment they initiated litigation to terminate the contracts and seek damages from the defendants. The defendants argued that that the vesting order, which approved the assignment of the contracts, and the provisions of the CCAA , eliminated the need for the defendants to obtain the plaintiffs’ consent or to notify them of the proceedings.

The court rejected these arguments and held that the CCAA , the Bankruptcy and Insolvency Act (“ BIA “), [3] and the wording of the vesting order did not alter the contractual rights of the plaintiffs. Among other things, the court held that CCAA proceedings generally cannot alter the contractual rights of third-parties without notice.

Statutory Guidance

The Barafield Realty, CCAA proceedings were commenced in 2008. In 2009, the CCAA and the BIA were amended to provide that a court may make an order assigning an agreement upon notice to each party to that agreement to any person who is specified by the court and agrees to the assignment. [4] As such, it is now clear that courts have the jurisdiction to make an order assigning certain pre-filing contracts provided the counterparties are given adequate notice. These provisions do not apply to post-bankruptcy or CCAA filing agreements, collective bargaining agreements, eligible financial contracts (i.e. derivatives and certain other financial agreements) or to rights and obligations that are not assignable by reason of their nature.

In deciding whether or not to exercise its discretion to approve a proposed assignment, the court is to consider, among other things: a) whether in a CCAA proceeding the CCAA monitor approved the assignment; b) whether the person to whom the rights and obligations are to be assigned would be able to perform the obligations; and c) whether it would be appropriate to assign the rights and obligations to that person. A court may not make an order approving the assignment unless it is satisfied that all monetary defaults in relation to those agreements will be remedied on or before a date fixed by the court.

In Practice

When obtaining a vesting order it may be possible to obtain court ordered protections relating to the assignment. For example, clarification that provisions in the contract that purport to entitle the solvent counterparty to terminate the contract or that impose onerous terms on the assignee are not enforceable where they arise solely by virtue of the debtor’s financial condition or the court ordered assignment.

Because the statutory provisions were enacted only relatively recently, courts have not had many opportunities to interpret the provisions in reported decisions. As a result, there remains some uncertainty as to how the provisions will be applied. For example: a) what constitutes a “monetary default”; b) exactly what rights and obligations are “not assignable by their nature”; and c) when is it appropriate for a court to assign rights and obligations to a specified person?

What is very clear is that counterparties that do not receive proper notice of the application to approve the assignment may not be bound by the assignment and may be permitted to terminate the contracts based on the insolvency of the assignor. Purchasers who intend to benefit from the assignment of such contracts must take care to ensure that proper notice is given.

by Adam Maerov and Mitchell Allison, Student-at-Law

[1] Barafield Realty Ltd. v. Just Energy (B.C.) Limited Partnership , 2014 BCSC 945 [ Barafield Realty ].

[2] Companies’ Creditors Arrangement Act , RSC 1985, c C-36 [CCAA];

[3] Bankruptcy and Insolvency Act , RSC 1985, c B-3 [BIA].

[4] CCAA, supra note 2 at s 11.3; BIA , supra note 3 at s 84.1.

A Cautionary Note

The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.

© McMillan LLP 2014

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Nationals Promote James Wood, Designate Eddie Rosario For Assignment

• Orlando Cepeda Passes Away
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By Steve Adams | July 1, 2024 at 8:18am CDT

The Nationals have made top prospect James Wood ’s previously reported promotion to the major leagues official, formally announcing the selection of his contract from Triple-A Rochester. In a corresponding move, veteran outfielder Eddie Rosario has been designated for assignment.

Wood’s promotion to the majors was reported last Friday, and MLBTR’s Darragh McDonald broke down the vaunted outfielder’s impending ascension to the majors at the time. The 21-year-old had laid waste to upper-minors pitching this season, delivering an outrageous .353/.463/.595 slash with 10 homers, 16 doubles and nearly as many walks (40) as strikeouts (42). Wood has drawn a free pass in a massive 17.3% of his trips to the plate and chipped in a 10-for-11 showing in stolen base attempts as well.

A second-round pick of the Padres back in 2021, Wood has elevated his status to the point that he’s widely regarded as the top yet-to-debut prospect in the sport. Baseball America and MLB.com both rank him as the game’s No. 3 prospect, but the players ahead of him between those two lists ( Paul Skenes , Jackson Holliday , Junior Caminero ) have all reached the majors at least briefly. Based on the timing of his promotion, Wood will now be under team control through at least the 2030 season and won’t be eligible for arbitration until the 2027-28 offseason.

Wood now joins top Nationals starter MacKenzie Gore and shortstop CJ Abrams as potential core pieces acquired by the Nationals in the blockbuster trade that sent Juan Soto to San Diego two summers ago. The Nats still have minor league outfielder Robert Hassell III and minor league lefty Jarlin Susana working their way through the system as well. Neither is viewed as having the type of ceiling Wood, Abrams and Gore have already shown, but Hassell is still just 22 and reached Double-A this year, while the 20-year-old Susana is in his second season at Low-A. Both players could yet reach the big leagues in the next few years.

Turning to the 32-year-old Rosario, he’s long been seen as a potential casualty of Wood’s big league promotion. The former Twins, Braves and Guardians outfielder signed a minor league deal with a $2MM base salary during spring training and made the team’s Opening Day roster despite a poor showing in nine spring contests. Rosario had an awful first month of the season (.088/.137/.162 through the end of April), followed by a blistering May (.253/.319/.530) before falling into another major swoon (.191/.200/.250 in June).

Overall, Rosario’s time with the Nats will draw to a close with a .183/.226/.329 batting line. That’s 46% worse than league-average production, by measure of wRC+ (54). Rosario’s 5.5% walk rate was his lowest since 2019, while his 23% strikeout rate is roughly in line with the 2022-23 rates he showed in Atlanta (but a far cry from the 16.1% mark he turned in from 2017-21).

The Braves acquired Rosario in a 2021 salary-dump deal with Cleveland and immediately saw him go on a magical run down the stretch, slashing .271/.330/.573 with seven homers in 106 plate appearances. He went on to deliver a legendary 14-for-25 performance with three home runs during the National League Championship Series, taking home NLCS MVP honors in the process, before slumping in the World Series.

Rosario’s late surge with Atlanta prompted the team to re-sign him on a two-year, $18MM contract that proved regrettable. He hit .212/.259/.328 in his first season of that contract, and while Rosario bounced back with 21 homers in 2023, his overall batting line was effectively league average (100 wRC+) while his defense continued to receive lackluster grades. Rosario was a productive everyday outfielder with the Twins from 2017-20 but in four seasons since that time he’s turned in a .236/.283/.403 batting line with poor defense and mounting strikeout rates.

The Nats will have five days to trade Rosario, release him or place him on outright waivers, though a veteran with Rosario’s service time would surely just reject an outright assignment to Triple-A anyhow. It’s unlikely that any team would claim even the modest remainder on Rosario’s contract. The likeliest outcome is a release, at which point Rosario will be free to sign with any team. A new club could owe him only the prorated league minimum for any time spent on the big league roster. That sum would be subtracted from what the Nats still owe him, but Washington will be on the hook for the majority of his contract at this point.

23 Comments

3 hours ago

Ewww que the music for Rosario to the Braves!

2 hours ago

If he wants to hang out in Gwinnett, then go for it, but it’s a lateral move at Best. At least Duvall plays good defense.

Queue the music for Padres regret for trading Wood for 1.5 years of Soto

Tidy piece of business here.

I had no idea of his size.

Baseball ref lists James Wood at 6′ 7″, 234 lbs.

So Washington has Wood.

Tell us something we didn’t know.

Toothless grin 🙂

Most Presidents of Baseball Ops and GMs would be fired for trading 3-5 foundational players and pieces for 1 1/2 years of a good hit, below average defense OF/DH (Soto) a very “overrated player”.

Preller is skilled at finding and signing young talent.

Preller is also skilled at blowing up the Padres farm system 2 or 3. times during his 10 year tenure with the Padres.

Preller was hired by the Padres Aug 6, 2014 and still has not taken the Padres to the World Series. Preller still has not won a World Series with the Padres. Peller still has not constructed a team that makes the playoffs on a regular basis.

Preller has constructed some interesting and fun teams. But, he has fallen short on constructing a perennial playoffs team, a team that makes the World Series multiple years, a team that WINS A WORLD SERIES!

Yes, I know Soto, if he continues performing at a high level for decades without major injuries and setbacks has a shot at the Hall of Fame.

But, as always, baseball is a team sport; Trophies, rings and championships generally go to the best team from top to bottom: Front Office, Scouting, Player Development, the entire Roster of Players and the Farm System, wise and supportive ownership that hires the best baseball experts and lets them make most baseball decisions based on the business plan and budget they put forth and who has the wherewithal to spend money for critical needs to put the team “over the top” when necessary.

Leaving aside that Soto is not overrated, the deal was for 2.5 years of Soto. That was, effectively 3 pennant races, for a team that felt it was close to a WS run. That the Padres subsequently 1/ didn’t achieve their goal and 2/traded Soto….does not affect the valuation of the trade when made.

The Soto trade was fine; the real issue was getting handcuffed with the Bogaerts signing (which is understandable in retrospect with Seidler’s declining health). I wonder what the team would look like without the Soto trade: Abrams in left field (would they have resigned Profar?), Merill in the infield, Sullivan as the backup C, and probably Lugo/Gore in the rotation instead of Cease/King/Vasquez. Tantalizing, for sure.

To add to that, maybe a 2024 reunion with Snell and Sanchez.

44 mins ago

The Padres currently hold the 2nd playoff WC spot and are outplaying the Braves since June 1st. The haters can hate. But AJ will have the Padres in the playoffs in 2024 with the no 1 WC spot and playing a 3 game playoff series in Petco in September.

Just say no AA to Rosario….

Sad Rosario didn’t work out. I’m headed to the game on Thursday the 4th, will likely see Wood in the morning that day.

You don’t see Wood every morning?

Cool that he’s debuting on a day with so few games — should be a lot of eyeballs on him today. I still vividly remember the HR he hit in spring training in 2022; he had such a compact swing for a dude his size even then.

Dear god I hope the Braves don’t bring Eddie back. Outfield is already terrible

Rosario has to be an upgrade over no hitting Luke Williams.

.253 is blistering?

He’s hitting 353 champ not 253

37 mins ago

I think teddyj is referring to Rosario’s slash line in May, which was by far his strongest month with the Nats.

26 mins ago

Yes it appears so. Rosario had a slugging percentage over 500 that month.

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NHL players from sexual assault case not offered contracts

• ESPN News Services

The four players remaining in the NHL from the sexual assault case that rocked Canadian hockey and led to multiple investigations of the nation's gold medal-winning 2018 world junior team were not offered contracts by their respective teams on Sunday, a major development in the story from a hockey perspective.

Charges were filed in February in London, Ontario, against five players, all of whom took a leave of absence from their respective teams. On Sunday, the four still on NHL rosters -- Philadelphia Flyers goaltender Carter Hart , Michael McLeod and Cal Foote of the New Jersey Devils and Calgary Flames forward Dillon Dube -- were not tendered qualifying offers, making them free agents, available to sign with new clubs as of Monday at noon ET.

The players are still awaiting trial after a woman sued Hockey Canada in 2022, alleging she was sexually assaulted by eight members of Canada's world junior team after a fundraising gala in London in 2018. Hockey Canada settled the lawsuit, and an investigation then revealed the organization had two secret funds to pay settlements on claims of sexual assault and abuse.

According to London Detective Sgt. Katherine Dann, the alleged incident happened in the early morning hours of June 19, 2018, after one of the accused met the victim at a bar and took her to Delta Hotel London Armouries.

According to court documents previously available, the woman, then 20, alleged that "John Doe #1" took her to a hotel room and invited seven other men into the room to perform undisclosed sexual acts, intimidating her and preventing her from leaving. The woman said in the lawsuit the men directed her to take a shower and asked her to say on video she was sober.

Dann said London Police received a call later on June 19, 2018, from a relative of the victim and launched an investigation. That was closed in 2019 with no charges.

The 2022 suit, which sought $3.55 million in damages and was dropped after reaching the settlement with Hockey Canada, led to police reopening the investigation and the charges against five members of that team. Asked about additional players, Dann said in February that charges have been laid "for all the charges we have reasonable grounds for."

The NHL launched its own investigation in 2022. Officials pledged to release the findings, though commissioner Gary Bettman said in February that would depend on what the league can say given legal proceedings.

Hart, McLeod, Foote, Dube and former NHL player Alex Formenton, now with the Swiss club HC Ambri-Piotta, have been charged with sexual assault. McLeod is facing an additional charge of being a party to the offense of sexual assault.

Attorneys for all five said the players are not guilty and will fight the allegations. The four NHL players were on paid leave from their teams until the end of this month.

The Associated Press contributed to this report.

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NHL teams cut ties with four players charged in 2018 sexual assault case

NHL teams have cut ties with four players who were charged earlier this year in a 2018 sexual assault case .

Philadelphia Flyers  goalie Carter Hart, Calgary Flames  forward Dillon Dube, and two New Jersey Devils  players, forward Michael McLeod and defenseman Cal Foote, didn't receive qualifying offers by Sunday's deadline for NHL teams to retain their restricted free agents.

Those four, along with former  Ottawa Senators  player Alex Formenton, were charged in February with sexual assault. McLeod faces two charges and the others face one charge.

Police say the assault occurred in London, Ontario, after a 2018 Hockey Canada gala honoring the gold-medal-winning world junior championship team.

"After the event, the accused and several teammates met the victim at a downtown bar and later invited her to a hotel room, where the sexual assault by the individuals now charged took place," London police chief Thai Truong said in a February news conference.

The four NHL players had requested and were granted indefinite leave from their teams. Lawyers for Hart and for the other players said they would fight the charges in court.

The London Free Press reported in June that no trial date has been set.

The four NHL players now become unrestricted free agents. Formenton played in Europe last season.

Contract buyouts

Sunday was also the deadline for teams to buy out players' contracts.

Buffalo Sabres forward Jeff Skinner is a free agent after the team bought out the remaining three years of his contract.

The Edmonton Oilers said they were taking steps to buy out goaltender Jack Campbell, who was sent to the American Hockey League this season following a disappointing one-plus seasons for the 2022 free agent signee.

Winnipeg Jets defenseman Nate Schmidt (according to TSN) and Columbus Blue Jackets defenseman Adam Boqvist also will be bought out.

Dallas Stars defenseman Ryan Suter (for a second time) and Flyers forward Cam Atkinson were bought out earlier.

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Deputy Prime Minister welcomes the Canada Growth Fund’s carbon contract for difference to generate more clean energy in Markham

From: Department of Finance Canada

News release

Today, the Honourable Chrystia Freeland, Deputy Prime Minister and Minister of Finance, welcomed the announcement of the Canada Growth Fund’s fifth investment.

The Canada Growth Fund’s innovative carbon contract for difference will expand affordable, low-carbon energy network to more residents and businesses

June 26, 2024 – Ottawa, Ontario – Department of Finance Canada

Through a novel form of carbon contract for difference, the Canada Growth Fund is working with Markham District Energy Inc.—the city’s public energy utility and Canada’s fastest growing energy utility—to expand its affordable, clean energy services to more residents and businesses. Markham District Energy’s network delivers reliable, cost-efficient heating and cooling to over 15 million square feet across 240 buildings.

Through a system of underground pipes, energy is delivered to buildings in the form of hot water and chilled water to heat and cool building space. This clean energy network is already attracting major new investments to Markham and reducing greenhouse gas emissions by 35 per cent, with a target of net-zero by 2050.

This carbon contract for difference will help Markham District Energy Inc. generate more clean energy by using Noventa Energy Partners Inc.’s Wastewater Energy Transfer (WET™) technology to extract thermal energy from wastewater. Over the 10-year carbon contract for difference being announced today, the project has the potential to reduce more than 177,000 tonnes of CO 2 e emissions with an initial price of $100 per tonne of CO 2 e.

In Budget 2024, the government announced its plan to grow the economy and create good-paying jobs today and for the next generation, including by expanding the Canada Growth Fund’s carbon contract for difference programs to new markets. Through initiatives like the Canada Growth Fund, the government is empowering entrepreneurs and innovators to turn their ideas into success stories, helping to unlock a brighter, more prosperous future.

“Our government’s economic plan is focused on building an economy that works for every generation—especially Millennials and Gen Z. Today’s Canada Growth Fund investment will help deliver more affordable, low-carbon heating and cooling, saving residents and businesses on energy bills.” The Honourable Chrystia Freeland, Deputy Prime Minister and Minister of Finance

“The City of Markham is proud of our commitment to sustainability and our investment in an industry leading district energy system. The Canada Growth Fund’s Contract for Differences was an important part of our decision to move forward with this project as it protects MDE from any potential future change in the price of carbon.” Keith Irish, Markham District Energy (MDE) Board Chair

Quick facts

The Canada Growth Fund is a $15 billion arm’s length public investment vehicle launched by the federal government to attract private capital and invest in Canadian projects and businesses, which is led by Canada’s world-leading public sector pension professionals.

Carbon contracts for difference accelerate investment in decarbonization and clean technologies by providing the carbon price certainty needed for industry to make investments that are intended to reduce emissions on a cost-effective basis.

Carbon contracts for difference guarantee a fixed minimum price of carbon when a company, such as Markham District Energy Inc., undertakes a project to abate its emissions in line with Ontario’s industrial carbon pricing system.

• If the carbon policy price per tonne of emissions is lower than the strike price set out in the contract for difference, the Canada Growth Fund will pay the difference to Markham District Energy Inc., helping to de-risk its investment in low-carbon energy solutions.
• If the carbon policy price per tonne of emissions is higher than the strike price set out in the contract for difference, Markham District Energy Inc. would pay the difference to the Canada Growth Fund.

The  2023 Fall Economic Statement   announced  that the Canada Growth Fund will be the principal federal entity to issue carbon contracts for difference (CCFDs), including allocating, on a priority basis, up to $7 billion of its current $15 billion in capital to issue all forms of contracts for difference and offtake agreements.

Budget 2024 announced that the Canada Growth Fund is developing an expanded range of CCFD offerings tailored to different markets and their unique risks and opportunities. The Canada Growth Fund will continue offering bespoke CCFDs and carbon offtake agreements, with a focus on provinces contributing significantly to greenhouse gas emissions reductions.

• Budget 2024 also announced that the Canada Growth Fund will explore ways to broaden its approach, for example, by developing off-the-shelf contracts for certain jurisdictions and ways to offer these contracts on a competitive basis for a set amount of emissions reductions.

Associated links

• Budget 2024: Fairness for Every Generation
• October 25, 2023: Deputy Prime Minister announces first investment by the Canada Growth Fund
• December 20, 2023: Deputy Prime Minister welcomes the Canada Growth Fund’s first carbon contract for difference
• March 25, 2024: Deputy Prime Minister welcomes the Canada Growth Fund’s third investment
• June 11, 2024: Deputy Prime Minister welcomes the Canada Growth Fund’s fourth investment

Media may contact:

Katherine Cuplinskas Deputy Director of Communications Office of the Deputy Prime Minister and Minister of Finance [email protected]

Media Relations Department of Finance Canada [email protected] 613-369-4000

General enquiries

Phone: 1-833-712-2292 TTY: 613-369-3230 E-mail: [email protected]

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Hurricane beryl 'extremely dangerous' as it gains strength in caribbean.

Hurricane Beryl strengthened as it churned toward the Caribbean's Windward Islands on Monday, according to officials, threatening devastating flooding and storm surges as life-threatening high winds picked up speed.

Warriors’ Andrew Wiggins won’t play for Canada at Olympics for medical reasons: Sources

Golden State Warriors forward Andrew Wiggins was not in Toronto for the start of the Canadian men’s basketball team’s training camp Friday that will help determine the country’s Olympic team for this summer’s tournament. Wiggins was named to the 20-man training camp roster earlier in the month but now will not participate in the camp or be eligible to make the team.

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On Friday evening at the team’s first media availability of training camp, Canadian general manager Rowan Barrett said he got a call from the Warriors a few days before the start of camp saying Wiggins would not be available to play. When asked if Golden State gave him a reason, Barrett said, “That’s something you have to talk to them about.”

A Warriors spokesperson responded to a request for comment from  The Athletic by saying the decision was made mutually by Wiggins and the team and Golden State could not preclude him from playing for Canada. This was a medical decision, team sources said.

“ Well, for us, Andrew was fine,” Barrett said. “We were talking to him consistently. He’s been training for weeks and weeks getting ready for this. And then I got a call from Golden State a day or two before camp saying that they’re holding him out. So, from what I see, this is not an Andrew decision. This is from the team.”

Wiggins played 71 games for the Warriors in 2023-24, but struggled through an ankle injury late in the season that lingered into the offseason, one potential medical issue that the team could have raised. He had a rough start to the year, finishing stronger, ultimately averaging 13.2 points and 4.5 rebounds per game.

Still, he was well off from his performance from the 2021-22 championship season.

Golden State has been active on the trade market in the lead up to free agency. Wiggins is due to make $26.3 million next season, and is on the books for $84.65 million over the next three seasons. His contract could be necessary to complete a trade to shake up the core, but this Olympic decision is separate from any trade talks, per sources.

This is a purely medical decision, made mutually, those sources said, ensuring Wiggins’ health entering next season.

Wiggins’ inclusion on Canada’s training camp roster was somewhat controversial. In the summer of 2022, Canada asked players to make a three-year commitment to attend summertime camps in order to be able to play in the Olympics , should Canada qualify. Canada Basketball softened that stance over time, but Wiggins could not make the commitment then because the Warriors were in the midst of their championship run and he was one year away from unrestricted free agency.

He ultimately signed a four-year extension with Golden State in October 2022.

Wiggins last played for Canada in 2021, when they lost in the semifinals of a last-chance qualification tournament in Victoria, B.C., for the Tokyo Olympics. He also played for the men’s team at the 2015 FIBA Americas in Mexico City, in which Canada lost to Venezuela in the semifinals.

A win in that game would have sent the team to the 2016 Olympics in Rio De Janeiro.

Wiggins would have had an inside track on a roster spot had he been in training camp, with Canada needing some bigger wings, largely for defense. This will be Canada’s first time in the men’s basketball tournament at the Olympics since 2000.

Wiggins’ mother, Marita Payne-Wiggins, won silver medals for Canada in the 4×100-meter relay and the 4×400-meter relay at the 1984 Olympics in Los Angeles.

“(I’m) bummed for him,” Barrett said. “And I had a good conversation with him, and he’s definitely trying to push the guys down the track almost, so to speak, hoping for the best for the guys.”

Canada won a bronze medal at last summer’s FIBA World Cup. The team is expected to be led by Oklahoma City Thunder star Shai Gilgeous-Alexander and Denver Nuggets guard Jamal Murray , with program veterans such as Toronto Raptors teammates Kelly Olynyk and RJ Barrett also likely headed to France.

Required reading

• After missing the Tokyo Olympics, Canada Basketball took ruthless approach to prepare for Paris

(Photo: Ezra Shaw / Getty Images)

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