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CONSUMER | When the Doorbell Rings: Direct sales contracts

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Photo by Cottonbro from Pexels

Your doorbell rings at home. You take a peek out your window. Then the realization hits you: it’s someone going door to door trying to sell you something again. If you’re anything like my cat (or me), you promptly hide in another room until the seller is gone –unless they are selling cookies, of course. For those of you who are brave enough to answer your door, or are at least curious about the legalities of door-to-door sales, you should keep reading.

In Alberta, the legal term for sales of goods or services door-to-door is a direct sales contract. A direct sales contract is a contract for goods or services (or both) totaling more than $25. You and the seller negotiate or sign the contract somewhere other than the seller’s usual place of business. Unlike a contract that you negotiate or sign in a marketplace, auction, trade fair, agricultural fair or exhibition, you will typically negotiate or sign a direct sales contract in your own home.

The Consumer Protection Act is the main law that applies to direct sales contracts. There are also regulations that set out more rules. For example, licensing processes for direct selling businesses and types of sellers that do not need a licence.

In Alberta, the legal term for sales of goods or services door-to-door is a direct sales contract.Direct sales contracts are legal but must meet certain legal requirements. For example, it must include specific information to be valid, and the Government of Alberta must licence the seller as a direct selling business. Not all businesses need a direct seller licence though. For example, insurance businesses, mortgage brokers and sales of perishable foods fit under this exception.

TIP: You can check if a seller has a direct seller licence by searching for the business on Service Alberta’s website. You can also call the Consumer Contact Centre at 1-877-427-4088.

Under the Consumer Protection Act, direct sales contracts must include standard contract information such as you and the seller’s full name and address, the date and place where the contract was signed, etc. Most notably, the contract must include a statement of cancellation rights and, if the purchase is financed, a disclosure statement.

A statement of cancellation rights sets out when and how you can cancel the contract. It must be on the front of the contract. Alternatively, there must be a notice on the front letting you know where in the contract the statement is.

On the other hand, a disclosure statement sets out the terms of the loan agreement between you and the lender. It includes information such as:

  • Amount borrowed
  • Loan duration
  • Amount and frequency of payments
  • Interest rate
  • Any other fees charged
  • What security the lender is taking. This could be in the form of a mortgage or registration against personal property such as your vehicles, boats, trailers, etc.

Direct sales contracts are legal but must meet certain legal requirements.Okay, so let’s say you decide to answer your door. Before you let the person into your home, you should ask to see their identification card. The ID must show their name plus the name, address and licence number of the direct selling business they are working for. You should also call or check with Service Alberta to confirm that the seller is licenced. If you find yourself in a situation where you might want to purchase something from the seller, here’s a couple of quick tips to protect yourself:

  • Like with all other contracts, make sure you review the terms carefully before you sign anything.
  • Do not rely on the sales representative to tell you what the contract says.
  • Make sure that any terms you agreed to orally are also in writing on the contract.
  • Do not let the sales representative pressure you into buying right away. You can always say no or take time to think about the potential purchase.

Lastly, what happens if you have buyer’s remorse after entering into a direct sales contract? Well, there’s a short window to cancel it. You can cancel it in writing within 10 days (including weekends and holidays) after you receive a copy of the written contract. There are some exceptions to this rule – for example, you have one year to cancel it if the seller did not have the required licence or the direct sales contract does not include all required information.

TIP: Is a door-to-door seller trying to sell you a furnace, air conditioner, water heater, windows or energy audit? As of January 1, 2017, the Government of Alberta has banned these types of door-to-door sales. But if you invite someone to your home to discuss buying these goods or services, then the transactions are still allowed.

To learn more about door-to-door sales, including cancellation rights, go to our publication: Door to Door Sales…What You Should Know.

CONSUMER | Canada’s Law on Consumer Product Safety

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20/20: Looking back over the last 20 years

In the past 2 months alone, you’ve probably heard about the recent food recall warnings on beef and romaine lettuce. Did you know that we have a law in Canada that deals with product safety and recalls?

The Canada Consumer Product Safety Act (“CCPSA”) regulates consumer products that pose or might pose a danger to human health and safety. Since the CCPSA came into force on June 20, 2011, over 7,000 items have been recalled in Canada. Consumer products, food, health products and vehicles – you name it.

Photo from Pexels

Before the CCPSA

Before the CCPSA (which was also known as Bill C-36), Part I of the Hazardous Products Act governed the health and safety of consumer products. Enacted in 1969, Part I of that Act covered products that were restricted through regulation or prohibited from being advertised, sold or imported into Canada.

The Act regulated approximately 30 products and product categories (for example, toys and chemicals) and prohibited 25 others (for example, baby walkers). For consumer products that posed a health or safety risk (but were not prohibited or regulated under the Act), it was up to industry to voluntarily issue and manage a product recall. The federal government’s power was limited to issuing a public warning and, if necessary, taking steps to regulate or prohibit products under the Act. Not only were there concerns about the Act’s limited application, there were concerns about it not keeping up with the swathe of consumer products entering the Canadian market.

2007 was a particularly rough year for product safety in Canada. Tainted pet food, spinach contaminated with E. coli, contaminated toothpaste and unsafe children’s toys were among some of the 90 products recalled that year. To put that in perspective, there was almost 3 times the number of product recalls in 2007 compared to 2006. Compounded with increasing concerns about the global nature of the marketplace for consumer goods and other products, the federal government had to make decisions about modernizing Canada’s approach to product safety. So in December 2007, then-Prime Minister Stephen Harper introduced the Food and Consumer Safety Action Plan and committed $113 million over two years to implement it.

The legislative path to what we now know as the CCPSA was a little bumpy. The government introduced two different bills to replace Part I of the Hazardous Products Act. One died when Parliament was dissolved in 2008 and the other died when Parliament was prorogued in 2009. Finally, the government introduced Bill C-36, An Act respecting the safety of consumer products, in the House of Commons on June 9, 2010. It received royal assent on December 15, 2010.

The CCPSA

The CCPSA consists of a preamble and 76 clauses. Its purpose is to protect the public by addressing or preventing dangers to human health or safety posed by consumer products in Canada. This includes consumer products circulating within Canada and those that are imported. The CCPSA carves out certain exceptions to its application in Schedule 1.

Issues have also been raised as to how often, if at all, Health Canada imposes fines under the CCPSA.Under the CCPSA, a “consumer product” is a product (including its components, parts or accessories) that you can reasonably expect an individual to obtain. It is a product used for non-commercial purposes, including domestic, recreational and sports purposes.

“Danger to human health or safety” under the CCPSA means any unreasonable hazard (existing or potential) posed during a consumer product’s normal or foreseeable use. For example:

  • anything that can cause death to an individual exposed to it
  • anything that has an adverse effect on the individual’s health, including an injury
  • any exposure to a consumer product that may reasonably be expected to have a chronic adverse effect on human health.

The death or adverse effect does not have to occur immediately after exposure to the hazard.

Administered by Health Canada, the CCPSA gives the federal government authority to order product recalls, levy penalties and establish mandatory reporting of consumer products that pose a health or safety risk. Unlike Part I of the Hazardous Products Act, the CCPSA requires industry to provide information and report on consumer product incidents to Health Canada. For example, manufacturers, importers and sellers of consumer products must report the following to the Minister of Health:

  • dangerous incidents associated with the products
  • product or labelling defects that result, or might reasonably be expected to result in, death or serious adverse effects on health (including serious injury)
  • consumer product recalls initiated by governments and government institutions in Canada or elsewhere.

The CCPSA also:

  • prohibits sale, manufacture, import and advertisement of certain products
  • provides for testing and evaluation of consumer products
  • requires inspection and seizure of consumer products to verify compliance or non-compliance with the Act
  • empowers the federal government to institute interim and permanent recalls of products that pose, or might reasonably be expected to pose, a danger to human health or safety.

The Canada Consumer Product Safety Act (“CCPSA”) regulates consumer products that pose or might pose a danger to human health and safety.The offences for failing to comply with the CCPSA and its regulations are complex and severe. For example, a person who contravenes the CCPSA (other than sections 8, 10, 11 or 20) or its regulations could be fined up to $5 million or imprisoned for up to two years, or both. Due diligence is a defence for this type of offence. As long as the person (individual or corporation) shows that they exercised a level of judgment, care, prudence or activity that a person would reasonably be expected to exercise, then they might be found not guilty.

Sections 8, 10, 11 and 20 of the CCPSA mostly have to do with the advertising and selling of goods, misleading claims, and false and misleading information. A person who contravenes these provisions, or knowingly or recklessly contravenes other provisions of the CCPSA or its regulations, can be fined (at the court’s discretion) or imprisoned for up to 5 years. For a first offence, there is a fine of up to $500,000 or up to 18 months’ imprisonment, or both. For a subsequent offence on summary conviction, there is a fine of up to $1 million or imprisonment of up to 2 years, or both. The defence of due diligence is not available in these circumstances.

Conclusion

Whether we realize it or not, the CCPSA has been a major development in consumer protection law in Canada within the last 20 years. Compared to its predecessor, the CCPSA was a legislative step forward in dealing with the expanding marketplace for consumer products in Canada. That said, critics have raised issues about the CCPSA over the years.

According to a 2016 case study done by the Centre for Public Impact, while some progress has been made through the CCPSA, Health Canada has failed to enforce the legislation strongly enough. As they point out, Canada’s auditor general in 2016 found:

[Because] Health Canada fails to systematically verify that industry is reporting incidents and submitting cosmetic notifications, health and safety issues may go unnoticed for extended periods. Furthermore, the Department cannot assure Canadians that it has acted promptly to address risks or that it has been effective in holding industry accountable for non-compliance.

While the auditor general’s report was done in the context of chemicals in consumer products and cosmetics, its observations about systemic lapses in incident reporting are concerning. Recent departmental reports on Health Canada indicate that it is working on addressing issues raised by the auditor general.

… there was almost 3 times the number of product recalls in 2007 compared to 2006.Issues have also been raised as to how often, if at all, Health Canada imposes fines under the CCPSA. Questions also remain as to whether the existing mandatory industry reporting and stiff penalties actually deter industry from manufacturing, importing and selling unsafe consumer products. After all, consumers continue to be barraged with what seems to be similar product recalls every so often – do pre-washed salads and frozen chicken products sound familiar, anyone?

As suggested by some critics, the CCPSA’s enforcement issues come down to lack of resources. There is not enough staff and money allocated to consumer products in Health Canada’s overall budget. Until that changes, the CCPSA can only accomplish so much.

Introduction to Contracts

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Consumer law covers a wide range of topics that are pervasive in our everyday lives – including contracts, advertising, credit, buying of goods and services, privacy and more. CPLEA often receives questions from the public about consumer law-related issues and so LawNow is launching this column to address these concerns. Our new Consumer column aims to help readers become better-informed consumers. This first article of the column will introduce what contracts are, what they look like and what laws apply to them.

Introduction to Contracts

The main source of law that applies to contracts is common law (judge-made law).Contracts are in every aspect of our everyday lives. When you rent a home, you have to abide by the terms of a lease. If you have a mortgage on your home, you essentially have a contract with your bank to pay back the money they lent you. When you go to work, the terms and conditions of your employment are likely outlined in a written employment contract. You are under a contract whenever you use your mobile phone or queue up your favorite show on your television subscription service. By the end of today, you will probably enter into some more contracts. Did you buy a coffee in the morning or grab some groceries? Work out at a gym? How about open up your web browser to read the news? Have you done some online shopping? All of these activities are governed by contracts.

What is a contract?

A contract is a type of agreement where there is an exchange of legally enforceable promises between parties. To create a legally-binding contract, there must be 6 essential elements:

  1. There must be an offer where one party is willing to enter into an agreement with another party.
  2. There must be an acceptance where one party signifies their willingness to enter into a contract with the party making the offer. An offer can be accepted by words or actions.
  3. There must be consideration given by each party. Consideration is a right, interest, profit or benefit experienced by one party with some detriment, forbearance, loss or responsibility experienced by another party. An example of consideration between parties is one party paying money and the other party providing a service.
  4. Parties to a contract must intend for the agreement to become binding when it is accepted by the other party.
  5. Generally, only parties who are privy to (named in) a contract can sue or be sued on the contract. Third party rights are usually not recognized except in specific circumstances.
  6. There must be certainty of terms between the parties to the contract. Each party must know what the terms of the contract are.

For each of these elements, there are additional rules that have been developed in case law. While we won’t be going into further details about the elements of a contract in this article, what you should know is that the elements of a contract often overlap. For example, the rules of certainty of terms and the rules of offer and acceptance overlap.

What does a contract look like?

A contract is often in the form of a written agreement between parties. Contracts can also be in the form of an oral agreement but oral agreements can be much harder to prove when a dispute arises.

A typical form of a written contract contains information such as:

  • the names of the parties to the contract;
  • when and where the contract was made;
  • terms and conditions that must be met by the parties;
  • what service, product or good is provided;
  • what is being exchanged (e.g., money) for the service, product or good that is provided;
  • an acknowledgment that the parties agree to the terms in the contract; and
  • the signature of the parties agreeing to the contract.

For example, when your employer offered you your job, they may have sent you an offer letter. This letter would have set out the name of your employer, your name, your salary, the number of holidays you get, your job description and duties, and any other terms of the job. This is a contract.

What laws apply to contracts?

The main source of law that applies to contracts is common law (judge-made law). The general rules on agreements and contract theory comes from the decisions of judges in past contract dispute cases, many of which come from England. While our body of knowledge in contract law in Canada has its roots in English case law, it has evolved over the years in the Canadian courts to suit our circumstances. In Canada, the Supreme Court of Canada has the ultimate authority in making binding decisions that Canadian courts must follow in contract dispute cases.

A contract is a type of agreement where there is an exchange of legally enforceable promises between parties.There is some legislation (parliament or legislative assembly-made law) that applies to particular types of contracts. However, the legislation is usually limited to setting out what the default rules are for the particular type of contract. There are varying degrees on how far legislation goes in setting out the “default rules” for a particular type of contract.

For example, the Residential Tenancies Act (RTA) applies to residential leases. If there’s an inconsistency between the RTA and a residential lease, then the terms in the Residential Tenancies Act will override the inconsistent terms of the lease. The RTA doesn’t go as far as setting out what information must be in a lease. On the other hand, the Consumer Protection Act, which applies to direct sales contracts, outlines specific information that must be in a direct sales contract –for example, a detail description of goods, a statement of cancellation rights, etc.

Conclusion

Contracts can take many different forms and exist in many different situations. In upcoming issues of LawNow, we will look closer at specific types of contracts that consumers enter into.

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