Contract Law -- Legal Advice for Small and Medium Sized Businesses

The Essential Elements of a Contract

A contract is a promise or promises, made by at least two parties, which is legally actionable if the promise is not kept. Everyday without realizing it we enter into numerous contracts.

In business it is essential that you recognize when you are entering a legally binding contract by knowing and identifying its 3 legal essentials: an offer, acceptance and consideration.

a.         Offer and Acceptance

To reach a contract there is a type of negotiation process during which an offer is made, and accepted.

An offer is defined as:

“An intimation, by words or conduct, of a willingness to enter into a legally binding contract, and which in its terms expressly or impliedly indicates that it is to become binding on the offeree or as soon as it has been accepted by an act, forbearance or return promise on the part of the person whom it is addressed.”

An acceptance is defined as:

“The expression, by words or conduct, of assent to the terms of the offer in the manner prescribed or indicated by the offeror.”

Often the offer and acceptance process is a very simple and informal one, for example you drive your car to a gas pump where the proprietor has offered impliedly to sell gas at $1.00 per litre, you accept this offer by the act of filing your gas tank.

 There are occasions where the offer and acceptance process is very complicated, involving many pages of terms constituting an offer, with the offer itself being revised many times through the negotiation process. For example, a lease agreement may be 50 pages long, and have taken months of offers, counter-offers, and negotiation to finally gain an acceptance, and finally becoming a legally binding agreement.

b.         Consideration

To be a legally enforceable promise a contract must involve consideration. Consideration has been defined in the following manner:

“A valuable consideration, in the sense of the law, may consist either in some right, interest, profit, or benefit accruing to the one party, or some forbearance, detriment, loss or responsibility given, suffered, or undertaken by the other”

A gratuitous promise, being a promise without consideration, is not enforceable in Canadian Law. By way of an example if Tom promises to give Brian $1,000.00, but doesn’t, Brian cannot sue Tom to enforce a contract, as Tom only gave a gratuitous promise. If Tom promises to give Brian $1,000.00 if he cuts Tom’s lawn, and Brian cuts the lawn, then consideration has occurred, and Tom has a legally enforceable obligation to pay $1,000.00.

 Many times in business one comes across the following language:

“Now Therefore in consideration of the payment by X to Y of $1.00 and other good and valuable consideration, the payment of which is acknowledged by Y…”

This phrase in many contracts is meant to ensure that the legal requirement of consideration having been paid for a promise to be legally enforceable has been met. The token amount of $1.00 will be sufficient consideration for the promises made by Y, no matter how valuable those promises may be.

For more information contact Courtney Aarbo Barristers and Solicitors at www.courtneyaarbo.ca or info@courtneyaarbo.ca or phone 403 571-5120 .

Common Law Relationships -- Family Law Information

Am I in a Common Law relationship?  If so, so what?!

What does "Common Law" mean in the Family Law context?

A lot of people consider themselves to be in a common law relationship, but what does that mean?  How long does it take to be considered to be in a common law relationship?  If I am in one, what rights and obligations do I have to my partner?

The term "common law" has a very different meaning depending on whom you ask and in what context.  If you ask the Canada Revenue Agency you will get one answer, if you ask your insurance company you will get another and if you ask the Alberta government you will get a third answer.  There is no uniform definition of common law in Canada.  Hence the confusion.

Basically everyone seems to understand that to be "common law" you have to be in a marriage-like relationship, as opposed to be living together with a roommate or family member.  You have to be a couple, right?  What does that mean? 

There are two definitions that are most common: one for federal tax law and one for area regulated by the Alberta government.

For the Canada Revenue Agency, you have to be living together for one (1) year in a conjugal or have a child together.  Here is its definition:

Common-law partner

 This applies to a person who is not your spouse (spouse = legally married), with whom you are living in a conjugal relationship, and to whom at least one of the following situations applies. He or she:

a) has been living with you in a conjugal relationship for at least 12 continuous months;

b) is the parent of your child by birth or adoption; or

c) has custody and control of your child (or had custody and control immediately before the child turned 19 years of age) and your child is wholly dependent on that person for support.

In addition, an individual immediately becomes your common-law partner if you previously lived together in a conjugal relationship for at least 12 continuous months and you have resumed living together in such a relationship. Under proposed changes, this condition will no longer exist. The effect of this proposed change is that a person (other than a person described in b) or c)) will be your common-law partner only after your current relationship with that person has lasted at least 12 continuous months. This proposed change will apply to 2001 and later years.

Note

 The term "12 continuous months" in this definition includes any period that you were separated for less than 90 days because of a breakdown in the relationship. For instance, if you and your spouse or common-law partner were separated for two months during the year, but reconciled before the end of the year, you are still considered to be married or living common-law for income tax purposes.

This is a very important definition when dealing with anything under the Federal Government of Canada and, in particular, your taxes.  There is nothing more important that the federal government does in relation to its citizens than collect and spend taxes.  On a day-to-day basis, it is the most common interaction between citizen and federal government. 

One needs to be accurate in declaring your status to the federal government.  First, nobody should ever lie to CRA.  Lying to the CRA is an offence that you have serious consequences.

Second, it is normally in most people's best interests to tell the truth.  One probably gets more benefits from being in a common law relationship than cost.  For example, if your partner dies then you can "roll-over" his or her RRSPs into your name without having to pay the deferred taxes on that income.  If you leave your RRSPs to a "friend" or your child then all the deferred taxes have to be paid upon death.  This can be a massive tax bill for all the people diligently maxing out their RRSPs. 


The Alberta Government has a completely different definition and, in fact, does not even use the words "common law".  The Alberta government uses the terms "Adult Interdependent Partners (AIP)" or "Adult Interdependent Relationship (AIR)".  It is basically the same thing with a longer title.  I suspect that the person who used to work for the Yellow Pages thinking up category names now works for government of Alberta thinking up names for legislation. 

To be considered an Adult Interdependent Partner (a common law couple) for any areas regulated by the provincial government, people have to have lived together for three (3) years or have a child together.  The Definition: 

In this Act,

(a) “adult interdependent partner” means an adult interdependent partner within the meaning of section 3, but does not include a former adult interdependent partner;

(b) “adult interdependent partner agreement” means an agreement referred to in section 7;

(c) “adult interdependent relationship” means the relationship between 2 persons who are adult interdependent partners of each other;

(d) “former adult interdependent partner” means a former adult interdependent partner within the meaning of section 10;

(e) “Minister” means the Minister determined under section 16 of the Government Organization Act as the Minister responsible for this Act;

(f) “relationship of interdependence” means a relationship outside marriage in which any 2 persons

(i) share one another’s lives,

(ii) are emotionally committed to one another, and

(iii) function as an economic and domestic unit;

(g) “spouse”means the husband or wife of a married person.

(2) In determining whether 2 persons function as an economic and domestic unit for the purposes of subsection (1)(f)(iii), all the circumstances of the relationship must be taken into account, including such of the following matters as may be relevant:

(a) whether or not the persons have a conjugal relationship;

 (b) the degree of exclusivity of the relationship;

 (c) the conduct and habits of the persons in respect of household activities and living arrangements;

 (d) the degree to which the persons hold themselves out to others as an economic and domestic unit;

 (e) the degree to which the persons formalize their legal obligations, intentions and responsibilities toward one another;

 (f) the extent to which direct and indirect contributions have been made by either person to the other or to their mutual well‑being;

 (g) the degree of financial dependence or interdependence and any arrangements for financial support between the persons;

 (h) the care and support of children;

 (i) the ownership, use and acquisition of property.

Application of Act

2 This Act applies to adult interdependent relationships arising before or after this Act comes into force.

Adult interdependent partner

3(1) Subject to subsection (2), a person is the adult interdependent partner of another person if

(a) the person has lived with the other person in a relationship of interdependence

(i) for a continuous period of not less than 3 years, or

(ii) of some permanence, if there is a child of the relationship by birth or adoption,

or

(b) the person has entered into an adult interdependent partner agreement with the other person under section 7.

(2) Persons who are related to each other by blood or adoption may only become adult interdependent partners of each other by entering into an adult interdependent partner agreement under section 7.

Relationship of interdependence

4(1) A relationship of interdependence may exist between 2 persons who are related to each other by blood or adoption except where one of the persons is a minor.

(2) A relationship of interdependence does not exist between 2 persons where one of the persons provides the other with domestic support and personal care for a fee or other consideration or on behalf of another person or organization, including a government.

Hows that for a short simple definition!

Next to taxes, this definition will affect the most people most often, assuming you live in Alberta of course.  The provincial government regulates far more of our lives than does the federal government.  For example, if two people are AIPs then they have significant rights and obligations under the Family Law Act and the Wills and Succession Act.  These two pieces of provincial legislation potentially affect all of our lives.  They regulate rights and obligations in common law and married relationships upon break-up and rights and obligations upon death.

For example, the FLA defines when and how much spousal support is paid by common law couples when they split up.  The WSA speaks to the right upon death and the obligations to your partner upon death.  Most people will live in a relationship covered by the FLA at some point in their life and all people will die at some point.  As Ben Franklin stated there are only two certain things in life: death and taxes.  At some point in time, people living together are going to have to deal with these definitions.  It is inevitable.

There is one area that is not covered by legislation or these definitions: property ownership amongst common law couples.  All married person fall under the Matrimonial Property Act.  There is no similar or analogous legislation for common law couples.  In other words, there is no specific government regulation of what happens to property when common law couples get together or breakup.  This area of the law is still regulated by the Laws of Equity and/or the Laws of Contract (which to confuse things even more -- is the "common law" -- not the common law applying to unmarried couple in a relationship but the general body of case law the has accumulated in Canada and other countries following that system of law -- These are the laws found in the accumulation of case law).  It is specifically called "constructive trust" or "resulting trust" or "unjust enrichment" law.  All terms are correct depending on the context.  How long does have to live together for these principles to apply?  There is no set time.  Rights and obligation can be in place when it is "just and equitable to do so".

Private Definitions

The above speak to government definitions.  Your insurance company, for example, may have a completely different definition to determine when your partner can get access to your dental plan.  There is not set time or definition.  One would need to ask their insurance provider or employer.

Host Liability -- Legal Advice for Small and Medium Sized Businesses

Host Liability of Bars & Restaurants For Impaired Patrons in Alberta

by Gary Courtney, Courtney Aarbo Barristers and Solicitors.

Over the past 20 years or so a significant number of cases across Canada have imposed liability on bars/restaurants when patrons leave their establishment in an intoxicated condition and end up harming themselves or others.

Almost invariably in such cases the bar/restaurant ends up being a defendant in a legal proceeding along with the intoxicated person, or at times with the intoxicated person being the plaintiff. The claims typically are for damages for the injuries to persons harmed by the intoxicated person.

Under the law, if a court finds a bar/restaurant even 1% at fault for the accident, with the rest of the responsibility being with the intoxicated patron, the bar/restaurant will be jointly liable with the intoxicated patron and therefore liable to pay all of the plaintiff’s damages. In many cases the defendant patron who is most at fault has no money to pay damages, or simply declares bankruptcy, leaving the bar/restaurant to pay 100% of the damages.

Of course bars/restaurants have quite expensive insurance in place, usually at least $2 million of coverage. It is critical to understand that in the event damages are higher than the insurance coverage however, the bar/restaurant will be liable for that excess. If damages are $3 million and there is but $2 million of insurance, the bar will be liable for the $1 million of difference. Given the amounts of potential damages in a catastrophic case, we recommend at least $5 million dollars of insurance coverage.

Regardless of whether there is sufficient insurance coverage to cover the law suit damages or not, being involved in a serious accident case will be very stressful, time consuming and an expensive experience for bar/restaurant owners, and their staff. It goes without saying that the best scenario for owners and employees of bars/restaurants is not to ever be involved in such cases, but if a law suit occurs, to be in a position where the bar/restaurant is not even 1% at fault, due to staff taking the necessary steps to deal with an intoxicated patron.

This memorandum is meant to provide bar and restaurant owners and employees with a summary of the recent cases imposing a duty of care on “commercial hosts”. Courtney Aarbo hopes that the readers will find it useful in minimizing the legal risk involved in these difficult situations.

1. When is there a legal  “Duty of Care” of a bar/restaurant?

A bar/restaurant owes a duty to take reasonable care for the safety of patrons and the public once a patron steps through its doors. That duty of is especially acute where there is a reasonably foreseeable risk of injury arising from a patron’s consumption of alcohol. Usually the reasonably foreseeable risk of injury centers around driving while intoxicated.

Once the bar/restaurant has a duty of care, it may be required (through the actions of its employees) to take positive steps to prevent a patron driving if the patron’s drinking creates a reasonably foreseeable risk of injury to the patron or third parties.

2. When does The Reasonably Foreseeable Risk arise?

The primary legal question is when is there a reasonably foreseeable risk of injury which puts the bar/restaurant under a duty to take positive steps to prevent injury to the patron or the public. Such a situation arises where:

A.        the bar/restaurant (through its employees) knows or ought reasonably to  know that the patron is intoxicated;

• whether a host ought to know that a patron is intoxicated will depend on visible behavior/speech of the patron and how much alcohol the patron has been served by the bar/restaurant;
• 
  
• of note is that the bar/restaurant  is required to monitor the level of a patron’s intoxication and alcohol consumption (even if the commercial host does not have the technical/logistical means to monitor consumption). Obviously this may entail knowledge by staff of how many drinks can normally be consumed before intoxication occurs, as well as a system to monitor patron’s consumption.

And

B.        the bar/restaurant knows or ought to know that the patron intends to drive;

• whether a bar/restaurant ought to know that a patron intends to drive will depend on (a) the location of the bar (is it accessible by car only) (b) whether the patron is known and usually drives (c) whether there are indications that the patron will drive (statements by the patron/others, signs of keys, showing of driver’s license) (d) whether the patron is with others who are sober and can be expected to take care of the patron and make safe arrangements for his travel;
• of note is one leading case , where it was held that if an intoxicated patron is in the establishment with a group of people, which includes sober adults who are aware of the consumption of the intoxicated patron, it is reasonable for the commercial establishment to assume that (i) the people will travel together and (ii) one of the sober people will drive or make arrangements to get the intoxicated person home – therefore it was not reasonably foreseeable in the circumstances that the intoxicated patron would drive.

The basis of imposing liability on a bar/restaurant for an intoxicated patron’s driving is that an intoxicated patron cannot be relied on to act reasonably (i.e. decide not to drive when it would be dangerous to do so) so the bar/restaurant must intervene to prevent him from driving.

Given the above rationale, it seems unlikely that the law would consider it reasonable for an employee to rely on an intoxicated person to commit to what he says, when he says that he will not drive. Intoxicated people forget, lie or fail to see the importance of what they are doing. In the case Neufeld v Foster /1999/ (BCSC), a bar employee asked an intoxicated patron in a group of 4 who were all intoxicated for his keys. The patron told the employee that he had already given his keys to someone and that the group would not be driving and would be taking a taxi. One of the 4 patrons drove, although it was not clear which. It was found to be reasonably foreseeable that one of the intoxicated patrons would drive, even despite an intoxicated member of the group saying that they would not.

3. What the bar/restaurant must do to meet the “Duty of Care”

Once it becomes reasonably foreseeable that the patron poses a risk of injury to highways users because it should be known that he is intoxicated and plans to drive, the bar/restaurant then has a duty of care that requires it to take positive steps so that it is no longer reasonably foreseeable that the patron will drive from the premises.

What kinds of positive steps to prevent an intoxicated person driving will satisfy a bar/restaurant’s duty of care to prevent the intoxicated patron driving? Reviewing the case law examples provides some guidance;

1. Jordan House Ltd. v. Menow 1973(SC) (a case where an intoxicated patron was leaving by foot and was injured on the highway), described the duty generally as a “duty to see that the patron got home safely” by “taking him under its charge” or “putting him under the charge of a responsible person” or “see that he was not turned out…until he was in a reasonably fit condition to look after himself”. Specific examples include:

• call the police
• call a taxi
• make arrangements with another person able and willing to transport the patron

2. Stewart v. Pettie 1995(SC) was a case where an intoxicated patron was with a group, including a sober wife and sister, who were aware of how much he had drank. The drunk patron drove, resulting in an accident and harm to the wife. The court stated that the standard of care of the hotel could be satisfied by putting the patron under the charge of a responsible person, or in a case where the patron is alone, by “calling the patron’s wife or sister to take charge of him”:

• in the case itself, the patron was already in the care of sober adults (wife and sister) who he came to the establishment with and who knew how much he had had to drink and the bar employees were aware of this;
• it was not necessary for the bar employees to take positive action to “put” the patron in their care – it was reasonable to assume that the group was not travelling separately and that the sober people would drive or make alternative transport arrangement (it was not necessary to ask questions confirming that the sober people would make proper travel arrangements);
• it was held that the bar was not negligent

3. Holton v Mackinnon 2005 (BCSC): a patron and his plaintiff friend had been drinking during the day and then drank further at a nightclub. The patron drove home, with the plaintiff in the car and arrived at home. They left again soon after and had an accident in which the plaintiff was injured. It was held by the court that;

• the nightclub had not satisfied its duty of care to the plaintiff;
• the court said that in the circumstances, a bar was required to “put the intoxicated patron in the charge of a competent, sober individual and prevent…[him] from driving his vehicle”.

4. LaFace v. McWilliams 2005 (BCSC): a patron who drove and injured third parties on the highway had been drinking at a hotel. Outside the pub, a member of the public saw the patron and recognized that he was drunk and about to drive. That person took it upon herself to try to find someone to take the patron home or drive his car home, by talking to the doorman and also going into the pub. She was not successful. At one stage, she specifically told an employee that the patron was drunk and needed help finding someone to help him get home safely. The pub employees did nothing and the patron drove. The court held;

• the pub had not satisfied it’s duty of care;
• the patron was not put into the care of a responsible person, even though the member of the public voluntarily took steps to prevent him driving;
• the case seems to say that even if someone accepts responsibility to prevent a person driving, if the bar staff are aware (or ought to be aware) of a risk that this will not prevent the patron driving, the bar must intervene;
• in such circumstances, the bar cannot simply say that another person has taken responsibility to get the patron home safely – the voluntary taking of responsibility by a member of the public does not remove the responsibility of the bar to prevent the person driving.

5. Neufeld v Foster /1999/ (BCSC): even though a bar employee demanded keys from one intoxicated patron in a 4 person group (although not from all of the group) and insisted that person not drive, questioned another intoxicated member of the group and was told that they intended to take a taxi, and then called for a taxi, the bar had not satisfied the standard of care required. The court held;

• the bar staff failed to see to it that the intoxicated patrons actually got in the taxi instead of driving;
• it seems therefore that whatever means the bar staff employ to prevent the patron driving, that method  must be relatively “complete”, in the sense that it is no longer reasonably foreseeable that the intoxicated patron will drive;
• in the case of using a taxi, the bar must ensure the patron gets in the taxi; in the case of taking keys, the bar must take keys, not just ask for them; in the case of putting the patron in the care of a responsible person, the bar must actually find someone willing and able to look after the patron and prevent him driving, not just attempt to do so;
• this is consistent with general statements about the standard of care required of a commercial host in Jordan v. Menow (“duty to see that [the patron] got home safely”) and Childs v. Desormeaux and Holton v MacKinnon (“ensure that the patron is in the care of a responsible person”).

6. Haughton v Burden /2001/ (Ont SCJ): intoxicated patrons were drinking in a nightclub. Staff called a taxi and ensured that the intoxicated patrons got into the taxi. After they had arrived home in the taxi, the patrons got into their own vehicle and were involved in an accident. It was held that by ensuring that the intoxicated patrons actually got into the taxi, the nightclub had satisfied its standard of care. However, the nightclub could still be liable for breach of its statutory duty in over-serving the patrons, since the Ontario Liquor License Act made a breach of that statutory duty actionable.

7. Little Plume v. Weir 1998 (ABQB): the plaintiff patron had been drinking for 24 hours before entering a bar. He stayed for 10 minutes dozing in a booth and the staff did not serve him. He was required to leave. An employee offered to call the patron a taxi but the patron walked out without answering, apparently intoxicated. After leaving the bar, the patron crossed the road (not at a crosswalk) and was struck by a car, rendering him a paraplegic. It was held that the bar had met the standard of care that it owed to the patron, by offering to call him a taxi. It was not necessary for the bar to see that the patron actually got into the taxi. The case seems to have been decided on the basis that the standard of care required of a bar/restaurant is less exacting if the commercial host has not served an already intoxicated patron alcohol.

The principle emerging from the case-law is that in order to satisfy the standard of care, positive steps must be taken by the bar to stop the patron driving so that it is unforeseeable (to a reasonable person) that the patron will drive. In other words - if the bar employee asks an intoxicated patron to hand over his keys, the standard is satisfied if the patron hands them over. If the patron has keys but does not hand them over (because e.g. he says that he has already done so, or has lost them), the standard is probably not satisfied without the employee going further by for example ensuring that keys are not on the patron’s person to be found once the patron is in a vehicle, or better yet convincing the patron to take a taxi or ride with a sober person and take steps to make sure this happens.

The case law indicates that it is not sufficient to absolve a bar of civil liability, that a responsible person has taken some action designed to prevent the patron driving away. It must also be reasonable to believe that the responsible person's intervention would prevent the patron from driving.

4. Conclusion

While obviously the cases have some inconsistency in how much the bar/restaurant must do to meet its duty of care once there is a reasonably foreseeable risk that an intoxicated patron may drive, some general themes have emerged.

The main principle is that bar/restaurant staff must take active steps to prevent an intoxicated person from driving. The steps may be to take away the persons keys and call a cab. A second option is to call a cab for the person and not take away his or her keys, although the bar/restaurant may still be liable if the patron gets into his car anyway. Case Law suggests that the bar/restaurant should make sure the patron gets into the cab to avoid potential liability if there is a real risk that the patron might not take the cab but instead drive away.

If dealing with an intoxicated patron in a group which includes sober persons, the bar/restaurant staff would be well advised to take positive action to make sure that a sober designated driver is the one that drives. The ideal scenario would be for the bar staff to go into the parking lot to make certain that the sober patron does in fact drive. Cases are not totally consistent but it may be enough if the bar/restaurant staff member asks the group who is driving, and sees to it that intoxicated patrons hand their keys to the designated driver. The risk is that out in the parking lot the keys might find their way back to the intoxicated patrons. It is less likely to be enough for the employees to simply ask the group who is driving, and the designated driver says ”I am driving” without the staff member at least making sure keys are no longer in the intoxicated patron’s possession.

In the event that an intoxicated patron will not cooperate with bar staff in the calling of a cab (and taking a cab), or surrendering keys to a sober designated driver, then we suggest that the police be called immediately, with attempts being made to delay the intoxicated persons departure until the police arrive to take control of the situation. Doing so will certainly strengthen the bar/restaurants argument that it took definitive steps to deal with the situation and therefore should not have liability.

 Obviously the best strategy is for the bar/restaurant to avoid over serving patrons, given the requirements of liquor licensing laws, the potential civil liability discussed above, and the difficult predicament staff are put in, in dealing with intoxicated patrons generally. Note though that the bar/restaurant can have the same duty to look after a patron if the bar serves only one drink to a patron who is already drunk, when he or she enters the premises.

We hope that the above summary of the current law will assist bar and restaurant owners and employees as they prepare their policy on this issue, and deal with this very difficult issue that presents itself on a daily basis.

If Courtney Aarbo Barristers and Solicitors can assist you in any other way with respect to legal matters involving your business, please call at 403 571-5120 or email at info@courtneyaarbo.ca .

 You can also vists the Alberta Gaming and Liquor website: http://aglc.ca

Congrats to Darryl Aarbo

Darryl Aarbo of our office recently chaired the Law and Practice Update conference for the Legal Education Society of Alberta (LESA).  Congratulations for taking on this challenge and we understand that the program was a great success.

The Law and Practice Update is a two day program offered by LESA directed at lawyer practicing in small and solo practices.  Lawyers with a full service practice.  Not only did it cover off substantive  areas of law, but it had a technology component as well.  Basically, how to bring the law office into the 21st century.  The areas of law covered were: civil litigation, family law, criminal law, tax law for non-specialists, wills and estates and residential real estate.  The program is offered once a year.

For more information on Legal Education Society of Alberta programs:

http://blog.lesaonline.org/?p=1017

Latent Defects -- Real Estate Law

When are Latent Defects actionable?

I recently argued an appeal in the area of latent defects in real estate transactions.  This is one complicated area of the law.  This posting, as with all posts, should be verified with a lawyer familiar with this area of law.  Also, this posting deals mostly with commercial real estate transactions, as opposed to residential.

The Alberta Court of Appeal has drawn a clear distinction between “concealment” and “non-disclosure”.  Concealment requires a positive step to hide a defect in land coupled with an intention to withhold knowledge of the defect from the purchaser.  Non-disclosure or mere silence is just a failure to volunteer information that might be of interest to the other side.  Absent a duty to disclose, non-disclosure generally has no legal consequences, except in rare cases.  The non-disclosure of a defect in the premises is generally not actionable unless there is a covenant in the contract that the defect does not exist.  Non-disclosure is not the equivalent of concealment: Motkoski Holdings Ltd.  v. Yellowhead (County), 2010 ABCA 72 at paragraphs 59 – 60, 63-64

The test in Alberta seems to be:

1. Is the defect complained of a latent defect?
2. Did the vendor have knowledge or was it reckless as to the existence of latent defects?  If so, was there active concealment of the defect OR was there non-disclosure and a covenant in the contract that the defect does not exist OR did the vendor make a misrepresentation as to the latent defects and did the buyer reply upon the misrepresentation?
3. Did the defects make it unfit for habitation or take away from the purchaser’s use, occupation or enjoyment of the premises?

The Fine Print -- Contract Law

Great Article on reading the fine print:

http://business.financialpost.com/2012/09/17/why-you-should-read-the-fine-print/

It is important for people and businesses to read all of the contracts that they sign.  If you do not understand what you are reading then speak to a lawyer.  The contract lawyers at Courtney Aarbo regularly assist small and medium sized businesses with contracts.

A few dollars at the front end of a negotiation can save a lot of money later.

Child's Wishes in Residency -- Family Law Information

When do children get to decide which Parent they want to live with?

The theme of recent posts is the misunderstandings that people have in the area of family law that have acquired some general acceptance in society.  Family law and divorce lawyers deal with these misconceptions all the time.

One misconception is the age at which children get to decide which parent they want to live with in a separation.  Many people believe that it is 12 years old.  This is not necessarily true.

The age of 12 is an important date, but 12 year old children do not get to decide where to live.  Family law lawyers are told by child psychologists that at about the age of 12 children can acquire enough cognitive development to be asked the question.  In other words, their opinion becomes relevant, but it will be not determinative at 12 or even 13.  Also, children develop at different rates so some 12 years may not have formed the cognitive development to even be asked the question. 

One always has to question, regardless of age, whether it is wise to be involving children in a parenting dispute at all.  Children cannot and should run a household.  They cannot and should not make parenting decisions.  They are children, not adults, and these are adult issues.  It is just that simple.

Before the age of 12 it is generally understood that children's opinions are not relevant.  They are too young to have any sort of say.  In fact, in my opinion, it is unfair and not in the best interests of the children to even ask.  It may do more harm than good.  Parents may think that they are doing a good thing by getting their child involved, but the psychologists I have talked to say it can actually be quite harmful.  Children will often tell both parents the exact same thing, that they want to live with them.  At that age saying that is not a contradictory statement: they do want to live with both parents. 

I attended a conference on this topic a couple years back and psychologists tend to agree that young children tend to make statements that adults may view as contradictory, but to the child they are not.  Children will often tell their parents what they want to hear.  They love the their parents and want to please them in a very stressful time such as separation.  Also children tend to sympathize with the parent in which care they are at that particular moment time.  If they feel a parent is stressed and wanting them to answer is a specific way then they will answer a question the way they feel the parent wants them to answer.  They are telling the truth, but they may be saying the same thing to both parents.  This will create a great deal of stress for young children and it is not in their best interests to be brought into this situation.  If parents then use this information to justify denying access or change access or bring court applications then this can cause serious distress to a child.

Alberta has a great program for spearating parents called the "Parenting After Separation Course".  It is free and mandatory in many circusmtances if the parents are in the court system.  It teaches important lessons for parents. 

Matrimonial Property Valuation -- Family Law Information

When to Value Matrimonial Property for the Purposes of Division

One thing I like to blog about are those questions you get asked all the time by clients or the misunderstandings that people have about the law that seem to have acquired "general acceptance" in society.  The problem is that these understandings are sometimes wrong.  The great thing about blogging is that you can address the same question to many people at the same time.

One issue that I have noticed a misunderstanding about is the time at which divorce lawyers value matrimonial property for the purposes of division in Alberta.  This is a family law problem that our lawyers help clients with all the time. 

This answer only applies to married couples, not common law couples separating.  Very different principles can apply to common law couples because their ownership principles are often decided under trust law, usually constructive or resulting trusts.  The reason for the difference is the Matrimonial Property Act of Alberta.  This act only applies to persons who are legally married. 

Section7(3)(a) of the Matrimonial Property Act essentially sets the date of valuation as the "date of trial".  What this means practically speaking is that the assets will be valued at the time of consideration or the last possible point in time.  Most matrimonial property disputes never make it to trial.  Trials are far too expensive for the average person, so they end up settling through some form of negotiation or mediation.  It is important to understand, however, that the assets will be valued at about the time of the settlement or the settlement meeting.  That is the last point in time where the issue is relevant.

Many people assume that the value of assets to be used for division will be set at the time of separation.  They feel that the day they breakup somehow sets the value of the asset. This is not true, unless both parties agree.  In fact, it is not even the date of divorce that is relevant.  Some people get divorced before they settle all their property disputes and they think that "this" must be the date, but no, it is the the last possible date for consideration.

The rationale for this is understandable.  The breaking up does not change the fact that the asset is matrimonial property.  It remains matrimonial property until is is divided or sold and the proceeds divided.  Until then, any market fluctuation in the value of the asset will affect division.  Why should either person be subject to market fluctuations and not the other?  The basic principle of property division under the Matrimonial Property Act is simple: subject to some exemptions, there shall be an equal division of assets acquired during marriage.  It does not matter in whose name the asset may be or in whose is in possession of the asset may be after separation.  There is a continued equalization of the asset until division.  In sum, both parties take the risk of market changes until the assets are finally decided.

It is section 7(4) of the Matrimonial Property Act that states that property acquired during marriage should be divided equally.  This is a principle that is followed quite strictly by Alberta Courts.  Section 8 of the Act does give some conditions to take into consideration when dividing equally.  Section 8(f) of the Act states that the Court can take into consideration the fact that a party may have acquired an asset after separation when deciding the division of property.  In my observation, however, it is almost impossible to invoke this provision to have the asset excluded from consideration because any assets acquired after separation generally would have required the use of matrimonial assets to purchase.  In other words, if you take an asset that was considered matrimonial property and sell it after separation to buy another asset then you are using matrimonial property to acquire the asset, so the Court will consider that asset to be matrimonial property as well.   In my observation section 8 of the Act does not provide reasons for an unequal division, but considerations to ensure an equal division.  For example, the Court will not simply divide up the face value of the asset, it will take into consideration any tax consequences or the like to ensure each party is getting a truly equal division of assets.  The purpose of section 8, in my opinion, is not to provide reason for an unequal division, but to ensure a equal division.  Unequal divisions are rare and one has to loo elsewhere for those reasons.

Mortgage Assumptions -- Real Estate Law

Warning on Conventional Mortgage Assumptions in Real Estate Transactions in Alberta

It used to be the case in Alberta that mortgage companies had little to say when new purchasers wished to finance their transactions by assuming the seller’s conventional mortgage.[i] This is no longer the case.

Mortgage companies are now almost invariably including ‘due on sale’ clauses in all residential mortgages.

The clause means that if a mortgage is to be assumed, the seller must first notify the mortgage company with information about the purchaser (no doubt information about the purchaser’s credit worthiness), and obtain written approval from them. If approval is not obtained, the mortgage company can demand immediate payment in full.

We recommend the following steps be taken writing up a real estate contract involving assuming a seller’s mortgage;

1. Ensure that if financing is planned to occur by a mortgage assumption, the seller must first notify the mortgage company of this intention, and the purchaser will have to provide information to that company.

2. Include as a condition to the transaction that the mortgage company allows the assumption by the purchaser. The condition should also require the seller and purchaser to contact the mortgage company in a timely fashion, and provide whatever information the mortgage company reasonably requires.

A further difficulty may be encountered where for example parents go on the title with a child to help out the child to obtain new financing where the child would not otherwise qualify. In this situation often the parents believe that shortly after the close of the purchase, they can transfer the title to their child with that child in effect assuming the mortgage for him or herself. In this situation the ‘due on sale’ clause may very well result in the mortgage company refusing the ‘assumption’ and requiring payment in full of the mortgage.

We recommend that parents and children be made aware that in the above situation the parents will need to stay on title for the longer term, until their child can qualify without them.

We hope this information is useful in structuring real estate sales and purchases. 

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[i] Different considerations apply for CMHC insured mortgages

Do I Need a Will? -- Wills and Estate Law

Do I really need a will?

Everyone needs a will, even single people with no children.   The rare exception may be single persons with no children and no assets, but most people will likely acquire some assets or have children in his or her lifetime.  Thus, even if one does not have any assets or children now then one should still have a will if they are planning on acquiring assets or having children in the future.

If you do not have a will then your estate will go “intestate”.  This means that someone will need to come forward and bring an application at the courts to have your assets administered in accordance with inflexible rules as to how assets should be divided.  Also, the government will decide who will raise your children.  It is a very costly process and takes much longer to administer. 

It is possible to draft your own will or use a kit acquired from a stationary store, but in my experience these very often create problems.  There are rules that must be followed.  There are rules that govern the validity of a will and there are rules about where your money should go.  For example, have you ever heard of the “Rule Against Perpetuities”?  It states that a gift in a will must vest within a life in being and 21 years.  If the rule is not followed the gift or the will could fail. 

The point is that people are not completely free to do whatever they want with their money on death.  There is a priority list of who must be paid and relatives who must be cared for upon death.  If any one of these rules are not followed then a will could be found to be invalid or go “partially intestate” (partially invalid).  Also, there are tax implications to just about everything that is done in a will (or not done!).  

Most lawyers do no charge a lot of money to prepare a will.  The cost to correct errors and omissions on self-drafted wills can cost many thousands of dollars and pit family member against family member.  Poor drafting can lead to an estate paying more tax than necessary.    Thus, for a small price to have a will drafted, you can possibly save many thousands in litigation costs, tax bills and family strife.

Finally, doing up a professional will allow the following goals to be accomplished in a manner that can be relied upon:

-          Pick the person(s) who will administer your estate and specify what compensation, if any, he or she should receive.

-          Pick a guardian for your children.

-          Make gifts to different people, or in different proportions than provided for by the Wills and Succession Act which says that everything goes to your spouse (or adult interdependent partner) if you don’t have children, and a combination of your spouse (or adult interdependent partner) if you do. This can be essential for blended families (second marriages).

-          Prevent people from having a share in your estate that might otherwise be entitled to a share.

-          Delay past age 18 when someone will receive a part of your estate.

-          Create a trust for someone, including a discretionary trust for disabled family members.

-          Give someone a life estate in something.

-          Chose alternate beneficiaries of gifts, trusts, or the residue of your estate.

-          Create mirror wills where you and your spouse decide how to plan your estates together.

-          Give to charities.