Commercial Contract Dispute Resolution

1. Commercial Contract Dispute Resolution Alex Kotkas Partner and Litigation Department Head - Calgary

2. Introduction • Choosing a dispute resolution model • Litigation • Arbitration • Drafting considerations • Strategic issues • Conditions, warranties and indemnities • Frustration and dispute resolutions clauses • Practical application/workshop

3. 1. Dispute Resolution Models:Litigation vs. Arbitration • Timing: there are clear advantages to dealing with dispute resolution up front • 2 primary models: Litigation or Arbitration • Additional dispute resolution steps: Negotiation and Mediation • More rare options: Mini-trials or Binding Mediation

4. Dispute Resolution Models:How to Choose? • Litigation Pros and Cons • Arbitration Pros and Cons • Most common process chosen (my experience): negotiation, then mediation (optional), then arbitration

5. Dispute Resolution Models:Issues to Consider • Applicable law • Place of hearing • Steps in the process and timing • Interim relief – court or arbitrator? Where? • Costs considerations • Currency • Language • Process for the selection of the decision maker • Remedies and recovery • Enforcement

6. Dispute Resolution Models:Strategic Considerations • In whose favour will delay work? • In whose favour will expense work? • What is the likelihood that a dispute will only involve the immediate parties? • Do you require an expert decision maker? • Are jurisdictional biases a concern? • Do you require extra or unusual remedies? • Is a legal precedent required? • What value does privacy have?

7. 2. Conditions, Warranties and Indemnities • Get assurances on the issues that are important to you • Establish a remedy if the issue is really fundamental: condition or warranty? • Consider remedies aside from rescission – will you suffer actual and quantifiable damages for a breach? • Indemnities provide a powerful remedy – but can you recover on the indemnity?

8. Conditions, Warranties and Indemnities • Concerns re: indemnities: • Typically there is no consideration flowing directly to the indemnitor • Failure to comply with the Guarantors Acknowledgment Act • Subsequent dealings with the primary obligor may release the indemnitor

9. 3. Frustration and Dispute Resolution Clauses • Frustration: When a supervening event, beyond the control of either party and for which no provision has been made in the contract, makes performance “radically different from that which was undertaken in the contract”. • Impossibility is not required • There is a commercial element to the analysis

10. Frustration and Dispute Resolution Clauses • When a contract is frustrated it is at an end • The losses lie where they fall • But what happens to the dispute resolution clause – especially if the very dispute is whether the claim of frustration is legitimate? • If the contract is terminated is the dispute resolution clause no longer applicable?

11. Frustration and Dispute Resolution Clauses • Short answer: No • Arbitration clause is typically treated as a separate or severable agreement (unless it is itself specifically frustrated): Heyman v. Darwins, [1942] A.C. 356 (H.L.) • Adopted by Canadian courts • But for greater certainty – draft survival into the dispute resolution and the frustration clauses