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Description of the Strategy Commercial law projects Status of Uniform Acts Recommended
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Commercial law projects
Of these elements, it has been decided to give immediate priority to promoting the speedy enactment of the ULCC's already completed uniform acts pertaining to e-commerce, commercial liens and cost of credit disclosure (and, most importantly, uniform regulations relating to the latter), and to actively press forward with other important initiatives relating to e-commerce and federal secured transactions. See chart: Status of Uniform Acts Recommended by the Commercial Law Strategy (Also available in PDF format)
Sale of Goods The new Civil Code of Quebec applies to sales contracts and as much as possible the general rules of the law of obligations were harmonized with those of the other Books (of the Civil Code), particularly with respect to security interests. Inspiration for the rules came from the United Nations Convention on Contracts for the International Sale of Goods. A Uniform Sale of Goods Act was adopted by the Uniform Law Conference of Canada in 1981, and has subsequently been refined, but is in need of modernization before it could be implemented. In the Uniform Commercial Code, Article 2 contains the American Sale of Goods regime. International Sales Conventions The Sales Convention establishes uniform rules for the international sale of goods which will apply in the absence of agreement to the contrary by the parties to the sales contract. While the Convention applies to contracts for the sale of goods, it excludes the sale of goods for personal use, sale by auction, judicial sales, and the sale of stocks, ships, aircraft or electricity. The provisions of the Convention deal with the formation of the contract and the rights and obligations of the seller and buyer. The Convention does not govern the validity of the contract or its terms, nor does it deal with the seller's liability outside the contract. In 1998 the Uniform Act was amended to incorporate terms implementing the related Convention on limitation periods in the sale of goods.
Implementation The Convention came into force for Canada on May 1, 1992, and applies uniformly across all of Canada since February 1, 1993. As of May 1998, 51 states are party to the Convention.No jurisdiction has yet enacted the revised Uniform Act with the limitations provisions. Secured Transactions Legislation in this area governs the obtaining of consensual security interests in personal property, establishes a system for registering notices of such security interests, governs the priority of many of the competing interests in such property and establishes enforcement rules. The law is nearly uniform in most of common law Canada under what is known as the Western PPSA. It is important to complete the harmonization and to maintain the harmony in this field, especially in light of significant changes recently made to Article 9 of the Uniform Commercial Code in the United States. Federal Secured Transactions At the present time, there is considerable debate over whether the federal government should enact secured transactions legislation such as a federal PPSA to deal with the property that is within federal jurisdiction or take steps to make it clear that provincial secured transactions regimes are responsible for regulating security in what is thought of as "federal property". The current scheme is arguably flawed in having, as its focal point, each individual type of federal property. What property might fit within a federal regime? It might include:
With respect to intellectual property, there is debate over the method of registering security in intellectual property between the regimes under the various federal intellectual property statutes and provincial PPSA's. There is also an issue over what interests in intellectual property can be secured. It will be necessary to rationalize traditional powers of enforcement by secured creditors with the fragile property concepts of some intellectual property statutes in which assertion of control by someone other than the property owner may result in dilution or destruction of the asset involved. This area of law needs clarification. There should be a resolution to the debate over the future of Bank Act security. This debate has raged for many years and a productive settlement of that debate should occur. The Law Commission of Canada and the ULCC are jointly sponsoring a project on Federal Secured Transactions. Security Interests in Mobile Equipment There are some serious gaps in legislation dealing with mobile equipment, particularly aircraft. The UNIDROIT Convention on International Interests in Mobile Equipment and Related Draft Aircraft Equipment Protocol addresses many of these questions and needs to be the basis of legislation. This Convention provides a framework for the creation and effects of international interests in mobile equipment (i.e., airframes, aircraft engines, helicopters, registered ships, oil rigs, containers, railway rolling stock, space property and other objects that could be identified in the future). Each of these types of mobile equipment will be the subject of a specific protocol under the Convention. A protocol will adapt to aircraft equipment the mechanism set out in the Convention. Among other things, it will establish a central registry to register interests in aircraft equipment. Commercial Liens Although Ontario has enacted modern lien legislation, that legislation is not in harmony. The current law in most of the other provinces provides unpredictable and often unregisterable lien claims for businesses such as repairers, storers, garage owners, innkeepers, warehousers and woodsmen. In Québec, when the Civil Code was reformed, the notion of liens was replaced with that of priorities. The number of liens that become priorities was also considerably reduced (see Articles 2650 to 2659 of the Civil Code of Québec). The Uniform Liens Act, adopted by the Uniform Law Conference of Canada in 1996, creates a unified set of rules about the nature and extent of certain non-consensual liens, the priority of liens against third parties and the procedure for enforcement. The Uniform Act was amended in 2000 to accommodate several criticisms. Warehouse Receipts, Bills of Lading and Other Documents of Title A Uniform Documents of Title Act was approved in principle by the Uniform Law Conference in 1995 based on similar work in Article 7 of the Uniform Commercial Code, but a final draft has not yet been prepared. This Act would codify the law relating to all forms of documents of title that have an established commercial usage. It covers bills of lading, warehouse receipts and other negotiable and non-negotiable documents of title. Documents of title are used primarily in interprovincial and international trade. The law on documents of title should be harmonized to the PPSA, to ensure that the effectiveness of the PPSA is not hampered. Transfer of Indirectly Held Securities The ULCC is one of the partners working on a project to update the law with respect to rights in securities that are held through an intermediary such as a broker. Current law does not reflect the reality that the owner of a share almost never holds the paper certificate. Securities transfers occur in a global securities market. Intermediaries for indirectly held securities operate across the country. As a result, harmonization and modernization is essential. This work is based on revised Article 8 of the Uniform Commercial Code. Commercial Leases Leases of personal property have existed for a long time. However, in recent decades, this type of transaction has increased exponentially. Today, leasing transactions are a significant segment of commercial activity in Canada involving billions of dollars annually and ranging in scope from consumers' leases of automobiles to leases of commercial aircraft and industrial machinery. It is evident that equipment leasing is big business in Canada and, indeed, in many other countries. Under our present law, transactions of this type are governed partly by common law principles relating to personal property and partly by principles relating to real estate leases. The legal rules and concepts derived from these sources do not adequately address many matters pertinent to lease transactions. In particular, there are uncertainties in four important areas: first, the classification of leases and, specifically, distinguishing between a "true" lease and a disguised secured sale; secondly, the nature of the warranties that might be implied in a lease contract in favour of the lessee; thirdly, the obligations of a lessor in a "financing lease" in which the lessor is neither the manufacturer nor the supplier of the item being leased; and fourthly, the remedies of a lessor where the lessee has breached its obligation under the lease. In the United States, Article 2A of the Uniform Commercial Code pertains to leases. It was added to the Code about ten years ago. The American experience under Article 2A merits careful study and, while views may differ as to whether the vagaries of the current law of leasing in common law jurisdictions in Canada necessitates an extensive codification of the law, there would seem to be little doubt that some reforms and clarification are in order. It is also important to note that the National Conference of Commissioners on Uniform State Laws is currently working on a uniform act on consumer leases and this approach is worth exploring as a complement to Article 2A. It should be noted that the Quebec Civil Code (Article 1842 to 1850 C.C. Q.) has dealt with leasing in specific ways and any project on leasing needs to keep the Quebec provisions in mind. The ULCC recently received a report recommending a consumer leasing statute and has that report under consideration. Licensing of Intellectual Property There are many kinds of licences. An increasingly important part of our commercial fabric is licences involving data, text and similar materials and transactions involving software, on-line and Internet commerce. As the modern economy is changing, the service sector is becoming increasingly dominant. The software industry - which provides the basic fuel for the information age - did not even exist until recent decades. The information industry now exceeds most manufacturing sectors in size. Information transactions and, in particular, transactions involving licensing of information, differ substantially from transactions involving the sale or lease of goods. The differences are manifested in both the conditional nature of the transaction and in the fact that value lies not in the goods but in the information and rights severable from the goods. A body of law tailored to transactions intended to pass title to goods is not readily adapted to transactions whose purpose is instead to convey rights in intangible property and information. In recent years, various groups in the United States have examined the consequences of the mismatch of concepts between contract law aimed at defining relationships in the sale or lease of goods and relationships in which information is the centre of the transaction and the contractual format most often is a licence rather than a sale or lease. They have concluded that transactions involving licensing of information differ substantively from transactions involving the sale or lease of goods. These differences, coupled with the commercial significance of the information industry, have prompted the adoption of a new uniform statute in the United States concerning Licences. The project has been controversial but the fate of the uniform statute (Uniform Computer Information Transactions Act, UCITA) should be monitored closely in Canada. Negotiable Instruments (Bills of Exchange) Important aspects of the Bills of Exchange Act (Canada) may need to be revised. In the view of the Working Group, it will be logical to include a revised Negotiable Instruments Act in the framework even though it will continue to be federally enacted. Cost of Credit Disclosure This project unifies the rules for calculating and disclosing the cost of consumer loans. This project was undertaken by the Consumer Measures Committee under the Agreement on Internal Trade working in conjunction with the ULCC. Final changes have been made to the Uniform Cost of Credit Disclosure Act of the ULCC, based on the drafting template prepared by the Consumer Measures Committee. Ministers of Consumer Affairs have undertaken to implement harmonized cost of credit legislation.
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