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LAW TIMES COVERING ONTARIO'S LEGAL SCENE | MARCH 25, 2019 7 www.lawtimesnews.com COMMENT BY ANDREW OT TAWAY THE United Nations Conven- tion on Contracts for the Inter- national Sale of Goods is law in Ontario by the International Sales Conventions Act. The CISG generally applies in Ontario to all contracts for the international sale of goods — that is, the sale of goods be- tween Ontario and countries that are parties to the CISG (be- ing nearly all of them, including the U.S.). The CISG is relatively un- known in Ontario. But a recent Court of Appeal decision under- scores that the CISG is the law in Ontario whether or not the par- ties argue it. Solea International BVBA v. Bassett & Walker Interna- tional Inc., 2016 ONSC 4860 involved a claim by a plaintiff for damages arising from the sale of shrimp to the defendant. The plaintiff was a Belgian sea- food trading company. It pur- chased the subject seafood from an Ecuadorian supplier. The defendant was a Toronto-based company that purchased the seafood for import into Mexico. This was an international sale of goods. The defendant refused to pay for the shrimp. The plaintiff sued and brought a motion for summary judgment. Both the plaintiff and defen- dant proceeded on the assump- tion that the common law of Ontario governed. The motion judge, applying the common law, granted judgment in favour of the plaintiff. The defendant appealed. In November 2017, the Court of Appeal in Bassett & Walker In- ternational Inc. v. Solea Inter- national BVBA, 2017 ONCA 886 found that the parties had not identified the proper law of the contract; if they had, they would have found that each of Ontario, Belgium, Mexico and Ecuador had ratified and acced- ed to the CISG. The Court of Appeal ordered that the motion be re-heard, applying the CISG. At the re- hearing, the motion judge again granted judgment in favour of the plaintiff but with a different analysis applying the CISG. The CISG matters. It is nota- bly different from the Ontario common law and Sale of Goods Act. Among other differences: 1. Consideration is not required to modify or terminate con- tracts governed by the CISG, an obvious difference from the common law; 2. A buyer is required to exam- ine the goods "within as short a period as is practicable in the circumstances." There is no such obligation in the com- mon law or the SGA. 3. A buyer cannot rely on a lack of conformity of the goods if the buyer "does not give notice to the seller specifying the na- ture of the lack of conformity within a reasonable time after the buyer has discovered it or ought to have discovered it." The obligation to give notice is closely related to the obligation to inspect: If the buyer fails to detect a "lack of conformity" because it did not conduct a proper and prompt inspection and did not give notice of the non-conformity, the buyer can lose the right to claim damages. The consequences of the fail- ure to examine and give notice are serious and may come as a shock to Ontario lawyers steeped in the common law and the SGA. The above is only a sample. There are many significant dif- ferences between the Ontario common law/SGA and the CISG, which could lead to starkly differ- ent results on the same facts. Despite being in force since 1992, the CISG is still obscure in Ontario. Few cases have applied it and fewer have interpreted its pro- visions in detail. The scarcity of cases may, in part, be because par- ties can exclude the CISG in their contracts. In some transactions between sophisticated parties, the parties' lawyers might turn their minds to and exclude the CISG. But in many other transac- tions, where there is less formal- ity in contracting, the parties may not even be aware of the CISG, much less think to ex- clude it. In many instances, the CISG governs the dispute, but the par- ties (and the court) simply over- look its application. In fairness to Ontario lawyers (and the court), the CISG is not widely taught in introductory contract law courses. It is only brief ly mentioned in the Ontario bar admission materials, which breezily states that "the exclusion of the CISG entirely is a common practice." The last CPD on the CISG ap- pears to have been in 2013. Law schools, the Law Soci- ety of Ontario and the profes- sion need to do more to increase awareness of the CISG in Ontario. It is, after all, the law in Ontario. The rest of the world, in- cluding the U.S., is much more familiar with the CISG. There is a substantial body of CISG case law (more than 4,500 cases) worldwide. The CISG case law is impor- tant. Interpretation of the CISG is meant to be consistent with its "international character" and the need to "promote uniformi- ty" in its application. In the Solea case, for example, the court (on the re-hearing) did not consider any of the CISG case law in in- terpreting the CISG, leading to some (arguably) anomalous in- terpretations. Ontario is lagging far behind the rest of the world in its use and understanding of the CISG. Appellate attention will help to increase awareness. The plaintiff in Solea has reportedly appealed the decision of the re-hearing. If the appeal proceeds, we will have a Court of Appeal decision in which the CISG is interpreted and applied to the merits of a case. It will be the first Canadian appellate-level decision to do so. Now is a good time to learn the CISG, before the Court of Appeal tells us to do so. LT Andrew Ottaway is a lawyer at Gilb- ertson Davis LLP, whose commercial litigation practice includes interna- tional sale of goods disputes involv- ing the CISG. BY JEFFREY LEM O ne of my favourite geek exercises is to ponder the most misunderstood real estate law doctrines of all time. The "Rule Against Perpetuities" is probably the capo di tutti capi of all such obscure doctrines. Remember, the Rule Against Perpe- tuities was considered so hard to under- stand that a California court concluded that a lawyer could not be negligent for misunderstanding it (that's a true story, but don't tell LawPro that you are relying on it!). Running a close second, however, is the "Double Default Rule." Justice Paul Perell's recent decision in Fortress Carlyle Peter St. Inc. v. Ricki's Construction and Painting Inc., 2019 ONSC 1507 is an excellent and recent showcase of how the Double Default Rule works. Presume that you are acting for a pur- chaser. You have a valid requisition that the vendor cannot or will not satisfy and that your client will not waive. Bazinga, you are in a position to ten- der on the vendor's lawyer and maybe seek specific performance for your cli- ent, maybe with an abatement — that is, until your accounting clerk tells you that, uhhh, well, you are not actually in funds and, uhhh, well, the agreed-upon con- tractual closing hour has now passed! It is true that the vendor is not in a position to close, but neither, it would seem, are you! Now what?! Now, go crosstown and switch places with the lawyer for the vendor using the exact same facts. You have been validly requi- sitioned on a matter that your client just cannot or will not answer. Your cause is looking doomed so you do what every good vendor's lawyer would do in such circumstances — you throw a "Hail Mary" by asking for evidence that the purchas- er's lawyer is "in funds." Who knows, they actually might not be ready, willing and able to close (besides, accord- ing to Brian Burke's Advanced Football Analytics, the chance of completing a successful long Hail Mary is about two per cent, but you reason that two per cent is better than nothing!). Guess what? The purchaser's lawyer is not in funds! It is true you are not in a position to close, but neither, it would seem, is the purchas- er! Now what?! This is "sort of " the fact scenario in Ricki's Construction, where the purchas- er had requisitioned the delivery of an estoppel certificate that the vendor could not or would not deliver. The purchaser's lawyer seemed to be in the driver's seat until it was discovered that there were no closing funds in the trust account at the agreed-upon 6 p.m. closing time! As it turns out, the bank had the mon- ey and finally made the transfer into the trust account minutes after closing. For all intents and purposes, the pur- chaser in this case was not in funds, but the vendor was in no better position, having failed to deliver a critical estoppel cer- tificate that was contractually required. Both parties were in default at closing, and neither party was in a position to close — a textbook Double Default. According to the Double Default Rule, where both par- ties are in default and neither party is ready to close on the scheduled closing date, the deal is not terminated. Instead, time of the essence is suspend- ed, and the closing is postponed sine die until resurrected by the first party who can give notice to the other party of a rea- sonable new closing date — in effect, it be- comes a "race to cure." The seminal case on point is King v. Urban & Country Transport (1973) 1 O.R. (2d) 449 (C.A.) and the rule is often still referred to as the "The Rule in King v. Urban." In Ricki's Construction, the pur- chaser's lawyer's trust account was in funds approximately 19 minutes after the missed closing hour. After the usual nasty exchanges of re- criminations and litigation threats, the purchaser realized that it was in a classic Double Default scenario and demanded a new closing date the next day. In this context, the court felt that a one-day notice was in fact reasonable, so that became the new closing date, and time of the essence was re-established us- ing that new closing date. When the new closing date dawned, the purchaser was then ready, willing and able to close while the vendor was still arguing that the deal was at an end. Ultimately, the vendor refused to close on the new closing date and was held to be in default. It should be noted that the description of the facts in Ricki's Construction here- in is only "sort of " ref lective of the case at bar, with some considerable paraphrasing liberties having been taken. The actual decision is a painfully de- tailed "play-by-play commentary of the factual and legal events" leading up to the Double Default. Moreover, Perell applied the Double Default Rule only in the alternative, so his discussion of the Double Default Rule may very well just be obiter dicta. That said, the case, as described herein, is a timely doctrinal reminder of the Dou- ble Default Rule. By volume of transactions alone, real estate activity seems down this year by about 11 per cent. Real estate lawyers are encouraged to take the relative "downtime" to refamil- iarize themselves with commonly misun- derstood real estate law doctrines, starting with the Double Default Rule (save the Rule Against Perpetuities for a recession!). LT Jeffrey Lem is the director of titles for the prov- ince of Ontario and an elected bencher for the Law Society of Ontario. This article ref lects the personal views of the author alone. Speaker's Corner Learn this contract legislation The double default rule: alive and well Jeffrey W. Lem The Dirt

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