With the Canadian dollar increasing in value in comparison to the American dollar, many British Columbian construction companies are looking to purchase equipment in the United States. A recent case illustrates the need to specify in the contract what country’s law will apply to the contract and in which country any dispute will be heard. Failure to do so may find you taking an unexpected spring break trip to a Florida courthouse (or Tuktoyaktuk for that matter)!
In B.A. Blacktop Ltd. v. Gencor Industries, Inc., B.A. Blacktop (“Blacktop”), a British Columbian company, entered into an agreement to purchase road construction equipment from Gencor Industries (“Gencor”), an American company located in Florida. The contract contained a choice of law and a choice of forum clause that stated:
This instrument and all questions regarding the performance of the parties hereunder shall be controlled by the laws of the State of Florida, and jurisdiction of any dispute shall be in Orange County, Florida.
Blacktop was not happy with the equipment or the service provided by Gencor so they sued Gencor in British Columbia. However, Gencor brought an application to dismiss the court action on the basis that according to the contract, any dispute had to be heard in Orange County, Florida.
Was Blacktop required to sue Gencor in Orange County, Florida or could they sue Gencor in British Columbia?
Unfortunately for Blacktop, the BC Supreme Court decided that the choice of forum clause required that the dispute be heard in Orange County, Florida. In reaching their decision the Court stated that:
Forum selection clauses … are generally to be encouraged by the courts as they create certainty and security in transaction.
The Court further stated that unless a local party can satisfy the court that there is a very good reason why it should not be bound by the choice of forum clause, the court will enforce the terms of the agreement, as that is what the parties agreed to when they entered into the contract. It would be unfair and create uncertainty for the courts to do otherwise.
Normally, in circumstances where a contract does not contain a choice of forum clause, the courts in British Columbia will generally look to see whether there is a “real and substantial connection” between British Columbia and the dispute. They do this by looking at the following factors:
- the location of the majority of the parties;
- the location of key witnesses and evidence;
- contractual provisions that specify the applicable law;
- whether a law suit has been started already in a foreign jurisdiction;
- the applicable law and its weight in comparison to the factual questions to be decided;
- geographical factors suggesting the natural forum; and
- whether declining jurisdiction would deprive the local party of a legitimate juridical advantage that is available in the domestic court.
In this case, the BC Supreme Court stated that despite the finding that there was a “real and substantial connection” to British Columbia, this was not a “good reason” why the parties should not be bound by the choice of forum clause.
However, even if the court in British Columbia did take jurisdiction, Blacktop may still have had difficulty in enforcing any judgment if Gencor refused to pay and it did not have any assets in British Columbia. While there are a few states in the United States that have an agreement with British Columbia regarding the reciprocal enforcement of foreign judgments, Florida is not one of them. As such, Blacktop may have had to commence a separate action in Florida anyways to enforce a judgment they already obtained in British Columbia.
While it may be nice to go to Florida for spring break, you likely don’t want to be there for a court case. As such, draft your contracts properly so that when you go, you can spend your time in the clubhouse rather than the courthouse.
- Be aware of the legal complexities when conducting business in foreign jurisdictions (which includes other provinces).
- Read the contract carefully to ensure that the choice of law and the choice of forum are British Columbia, and negotiate when they are not.
- If you have a contract and the choice of law and the choice of forum are not British Columbia, obtain legal advice locally and in the foreign jurisdiction to know what your legal rights and obligations are.
This article was written by Robert G. Kuhn and Ian C. Moes, lawyers who practice in construction law at the law firm of Kuhn LLP. It is only intended as a guide and cannot cover every situation. It is important to get legal advice for specific situations. If you have questions or comments about this case or other construction law matters, please contact us at 604-864-8877.