Taking them at their word? The validity of verbal contracts

 In Commercial Litigation

Ramsay v BCE Inc.

The Toronto Small Claims Court recently found that a telephone conversation between an individual consumer and Bell Canada constitutes a legally enforceable oral contract – one which cannot be superseded by written terms emailed after the fact.

In David Ramsay v BCE Inc. the Plaintiff Mr. Ramsay called Bell Canada and ultimately purchased internet and television services for a term of 24 months. Having reached an agreement by phone, Bell Canada then sent Mr. Ramsay an email containing new terms including an increased price and an entire agreement clause.

Deputy Judge De Lucia found that when the telephone conversation concluded, a contract was in place with all of the essential elements, including consideration and sufficiently clear terms. Bell Canada’s later attempt to unilaterally raise the agreed-upon price was thus in violation of a valid and enforceable contract.  A party to a contract cannot unilaterally insert new terms without fresh consideration.  Where new terms involve price increases, any attempt to unilaterally change the verbal contract will be considered high handed and unacceptable by the Court.

The Court explained that while Bell Canada has the commercial right to impose price changes, it cannot do so during a contractual term.  The term in this case was 24 months, as agreed upon verbally between the parties.  Bell Canada’s attempt to clarify, introduce and bring attention to the new terms of the contract through subsequent emails was held to be unacceptable.  Given that none of the new terms were part of the original contract, they were found to be unenforceable.

Implications for Commercial Parties

Even though the damages award was low, the Small Claims Court’s reasoning should provide a caution to companies that engage consumers by telephone.  If your company contracts over the phone, it may not be possible to supersede the terms of the initial verbal contract with subsequent written terms.

For the sake of clarity and consistency, it is always best practice to reduce contracts to writing.  This holds especially true for companies that regularly contract with individual consumers. Employees who engage consumers by telephone should be trained to ensure best practices are followed at every consumer interaction.  Ensuring contracting protocols are followed at each consumer interaction will reduce the likelihood of unexpected terms or liability for the corporation in the future.

Shauna Cant is a member of the Commercial Litigation team. She can be reached at 613-369-0359 or at shauna.cant@mannlawyers.com.

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