The Québec Court of Appeal (the "Q.C.A.") just decided that a dispute between a consumer and a merchant pertaining to an internet sale can be subjected to binding arbitration as long as the arbitration clause respects the strict criteria enunciated by the Civil Code of Québec ("C.C.Q.").
This matter concerned a class action undertaken by consumers who tried to order computer products on the internet.  Dell refused to honour the sale because there was an error in the pricing which Dell had thought to correct beforehand.  Dell was asking the court to dismiss the motion for permission to institute the class action by arguing that the sale contract contained a binding arbitration clause.

In this case, the consumer attempting to make a purchase on Dell's internet site acceded first to a clause referring him through a hyperlink to the arbitration clause contained on another page.  According to the Q.C.A., this arbitration clause by reference, redacted in small characters at the bottom of a page, did not constitute sufficient notice.  Furthermore, a review of the conditions of sale, including this arbitration clause by reference, was not a compulsory step prior to making the order.  By reading these conditions, the consumer was still not properly informed about the arbitration clause since he had to go to another page to obtain complete information with respect to the arbitration and its terms.  The Q.C.A. held that, to be executory, the arbitration clause must be clearly brought to the attention of the consumer prior to the sale occurring (article 1435 C.C.Q.).  The hyperlink did not constitute evidence of knowledge and acceptance by the consumer of the information that it contained unless it was proven to be a compulsory preliminary step prior to the consumer being allowed to place an order.

Of great importance is the fact that the Q.C.A. has recognized as valid an arbitration clause contained in a consumer contract.  Arbitration is not excluded by the concept of a "tribunal" as that term is used in section 271 of the Consumer Protection Act.  This is because the legislator, according to the Q.C.A., did not express an intent to exclude arbitration and arbitration in itself is not incompatible with a class action as a procedural vehicle.  The merchant who sells on the internet to Québec consumers can therefore validly remove from the jurisdiction of civil courts claims brought by consumers if the arbitration clause satisfies the strict criteria enunciated by the Q.C.A., including the prohibition of an arbitration clause by reference or which is not clearly brought to the attention of the consumer prior to the passing of the contract.

This case will have an important impact on the use of such arbitration clauses in consumer contracts and may also play a role with respect to class actions.  Any merchant operating an internet site to sell products in Québec should carefully review the arbitration clause that it may contain to ensure that it satisfies the criteria imposed by the Q.C.A. 
 
 
For further information, contact Laurent Debrun at 514.841.6502.

Davies Ward Phillips & Vineberg LLP, with over 225 lawyers, practices nationally and internationally from offices in Toronto, Montréal, New York  and Paris, and is consistently at the heart of the largest and most complex commercial and financial matters on behalf of its North American and overseas clients.

The information and comments contained herein are for the general information of the reader and are not intended as advice or opinions to be relied upon in relation to any particular circumstances.  For particular applications of the law to specific situations, the reader should seek professional advice.