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UPM Raflatac, Inc. v. Okanagan Label & Print Ltd., 2022 BCSC 1154

Case Reporter

Written by Ty Schmidt, supervised by Darcy MacPherson

Can a general sales condition form part of a separate sales contract and thereby limit the liability of the seller? Yes, says the Supreme Court of British Columbia in the recent decision of UPM Raflatac, Inc. v. Okanagan Label & Print Ltd, 2022 BCSC 1154; particularly when the parties have done business together over a long period of time, and the buyer has routinely assented to the terms of the general sales conditions associated with each sales contract.

Okanagan Label & Print Ltd. (“OKLP”) is a label business that designs, manufactures, and prints labels for its customers. UPM Raflatac, Inc. (“UPM”) is a global manufacturer and supplier of label paper and adhesive. In 2012, OKLP began purchasing materials from UPM, and continued to do so through to 2018.[1] In 2016-2017, OKLP received, and subsequently made a claim for, allegedly defective goods valued at $8,909, plus an additional $115,683 in “consequential damages”.[2] Over the next two years, OKLP ordered and received a further $184,100 worth of product from UPM, but did not pay the associated invoices.

OKLP claimed that they have a right to set off the amount they owe ($184,100) with their defect ($8,909) and damages ($115,683) claims. UPM claimed that their liability is limited by terms in their general sales conditions that apply to all of their sales contracts with OKLP – such that they are only liable for the value of the defective goods ($8,909). Thus, Warren J. was tasked with determining a) whether the general sales conditions formed part of the sales contracts, and b) whether those conditions limit OKLP’s claim to the value of the defective goods.[3]

The judge found that the conditions were part of the sales contract for a number of reasons. Evidence showed that the parties had a long course of dealings where each order confirmation and each invoice included an express statement that the conditions applied. Both OKLP’s president and its manager routinely reviewed those documents and had read the conditions. Further, OKLP never objected to the application of the conditions. As a result, “the only reasonable inference…is that OKLP evinced an acceptance and readiness to be bound by UPM’s general sales conditions.”[4]

It was also found that the limitation of liability clause in the conditions is enforceable because it clearly applied to the claims advanced. While OKLP asserted that the clause was unconscionable at the time the contract was made, the Court held that there was no basis to reach this conclusion.[5] Further, because “there is a strong public interest in the enforcement of contracts between commercial entities”, there were no public policy reasons to not enforce the clause.[6] Though OKLP argued that there was an implied term that consequential damages will be paid, this could not be the case, since there was an express term of the contract which expressly provided the opposite.[7]

In the end, OKLP owes the full amount of their unpaid invoices, plus interest, less a holdback of $8,909 for the defective goods. This case shows why any problems with purchased goods should be immediately brought to the attention of the supplier in order to prevent future conflict and the potential for litigation. It also shows the importance of regularly reviewing sales contracts and conditions over the course of a business relationship and addressing any terms that could be a cause for concern.

[1] 2022 BCSC 1154 at para 5.

[2] Ibid at para 17.

[3] Ibid at para 29.

[4] Ibid at para 63.

[5] Ibid at para 81.

[6] Ibid at para 83.

[7] Ibid, at para. 85. On the facts of this case, the court is clearly correct on this issue, as this is clearly a case where the alleged implied term is one that would be implied in fact, based on the intention of the parties, not a term implied by law. For a discussion of the difference between these types of implied terms, see the decision of Justice McLachlin, as she then was, in Machtinger v. HOJ Industries Ltd., [1992] 1 S.C.R. 986 (concurring in the result). According to Justice McLachlin, as she then was, in Machtinger, terms required to be implied by law may go against express terms of the contract.

The views and opinions expressed in the blogs and case reporter are the views of their authors, and do not represent the views of the Desautels Centre for Private Enterprise and the Law, the Faculty of Law, or the University of Manitoba. Academic Members of the University of Manitoba are entitled to academic freedom in the context of a respectful working and learning environment.