Facebook lost a major legal showdown at the Supreme Court of Canada last week, as the court refused to enforce a forum selection clause included in its standard online contract requiring that legal actions against it be brought in California. In doing so, the court paved the way for a privacy class action lawsuit to proceed in British Columbia under provincial privacy law.
My Globe and Mail op-ed notes that a majority of the court ruled that the unequal bargaining power between consumers and companies such as Facebook meant that the clause should not be enforced. While the ruling can be narrowly interpreted as an affirmation of the importance of privacy rights and as a rebuke to companies that seek to contract out of those rights through forum selection clauses, the decision could have a far more reaching effect, forcing a re-examination of non-negotiated online contracts.
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The Supreme Court of Canada issued a landmark decision this morning on the enforceability of forum selection clauses in online contracts, rejecting Facebook’s effort to block a privacy class action lawsuit in British Columbia on the grounds that its own contract specified that legal actions be brought in California. A divided court ruled that the unequal bargaining power between consumers and companies such as Facebook – combined with the importance of privacy rights – meant that the clause should not be enforced and that the lawsuit should proceed in Canada.
The decision represents a clear recognition that courts should not be quick to allow companies to contract out of important rights by ousting local laws through forum selection clauses. More broadly, the terms found within non-negotiated take-it-or-leave it clickwrap contracts should not always be enforced by the courts, particularly where important rights or remedies might be lost by doing so. While forum selection clauses are an obvious mechanism for restricting rights, the reasoning might also be applied to other online contractual terms that seek to override important laws and protections. These could include contractual terms that seek to override copyright user rights such as fair dealing or local consumer safeguards.
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