Towards Commercial Law Framework for Canada 1998

The Case for Reform

This paper makes the case that Canada is in need of a commercial law framework. In other words, Canada would benefit considerably from a strategy that gives provinces and territories as well as the federal government, a blueprint for the reform of Canadian commercial legislation. Existing commercial legislation, is for the most part, lacking in uniformity and is seriously out-of-date. The only significant effort at large-scale modernization of commercial legislation in Canada in the last 50 years has occurred in Quebec with recent enactment of the revised Civil Code and in the common law provinces, with the development and significant harmonization of the Personal Property Security Acts in a number of jurisdictions.

How is the need for such a strategy articulated? In general terms, the case can be made that the Canadian economy needs a predictable, responsive and efficient legal system regulating the marketplace. Legislation is a critical element of that regulatory framework.

1. Predictability: In a federal system, each jurisdiction has considerable latitude to enact laws that suit its circumstances. Not all legal rules in one jurisdiction need to be the same as those of its neighbours. However, in commercial law, in a modern nation, competing in the world economy, a lack of harmony causes serious practical problems. Harmonized commercial law brings predictability to the marketplace.

2. Responsiveness: The commercial world values responsiveness to the needs of business and consumers. An ad hoc approach to commercial legislative reform in thirteen (soon to be fourteen) Canadian jurisdictions means that we have an inherent inability to operate within a A national vision and to be able to respond to problems as they arise in a cohesive way.

3. Efficiency: The marketplace values efficiency. The Internal Trade Agreement is based on the notion that Canada is a more efficient marketplace if trade barriers can be lowered within Canada. A key element of an efficient marketplace is the certainty provided by a predictable, harmonized legal infrastructure. It must be more than that however. It must be sensible, rationale and attuned to changing times.

Our current legal infrastructure does not meet any of these tests.

This analysis is interesting as far as it goes. But what are practical examples of these shortcomings in our current legal infrastructure:

1. Lack of harmonization means a higher risk of error. Where risk exists, it is harder or more expensive to do business. Reform means lower risk of error or unwanted legal result where laws are modern and reflect current business practices.

2. Lack of harmonization means that different business or consumer forms are used for different provinces - harmonization should mean that similar forms could be used throughout Canada. These include forms dealing with guarantees, exemptions, formalities, cost of credit disclosure, etc.

3. Lack of harmonization creates significant difficulty for consumers. In a highly mobile economy, consumers would be well-served by commercial law that has consistent, modern and understandable standards from one jurisdiction to the next.

4. Modernization of law reduces confusion or inconsistency with foreign laws, especially those based on modern conventions. For example, Canada is a party to the Vienna Sales Convention (UN Convention on the International Sale of Goods). That means that sales between Canadians and foreigners in contracting states (such as the USA) are governed by the Convention ' s rules unless parties opt out. Those rules are modern and clearer than those under the Sale of Goods Act. As a result, Americans and foreign parties get better rules of law dealing with Canadianimporters and exporters than Canadians do among themselves.

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