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Desired virtues of virtual ‘corporate’ services

The Future Files
|Written By Ben Hanuka
Desired virtues of virtual ‘corporate’ services

Among the objectives of technology in the modern delivery of legal services is enabling access to justice for the public.

Many hurdles to broadening access to justice exist. The issues are complex and multi-faceted and transcend any particular area of law or even discipline. The legal profession is starting to consider promoting better access to justice through the unbundling of legal services.

One element of unbundling is a virtual delivery of simple and routine services, such as incorporations, business registrations, business name trademark searches, and filing corporate forms. Provincial and national private vendors offer this sort of service to consumers online.

Some online virtual companies provide more than simple, routine services. They provide complex commercial agreements. Cost is, no doubt, an important factor but it is not the sole factor in the analysis. If a particular type of service ends up creating more pitfalls than benefits or sidesteps regulatory requirements designed to protect consumers, then the best interests of the public are not met and access to justice is not promoted. To the contrary, doing so would be a disservice to the public.

While in this article I am critical of some overreaching aspects of virtual services, in my opinion this sort of a service is generally worthy and fills a much-needed demand in our society. I generally support the expansion of unbundled legal services by creative legal enterprises, including the delivery of virtual services where appropriate. Indeed, wearing my commercial litigator hat, I wrote in the December 2013 issue of The Advocates’ Journal about the historical and evolving future importance of these types of services in the overall context of strategies to promote access to justice.

There is a problem when online vendors sell inherently complex contracts in a standardized form without customizing agreements to consumers’ genuine legal needs, and invariably without consumers understanding the meaning of the contracts being sold to them, or their impact on their rights and obligations.

I decided to take a look at the well-known U.S. legal site LegalZoom.com. Good-old Google directed me instead to the Canadian version of the site, LegalZoom.ca. A quick inspection of the site revealed its real delivery of services in Canada is handled by a Montreal-based company called CorporationCentre.ca.  Its web site is detailed and apparently consumer-friendly, with prices that appear to be mostly cost-efficient and accessible.

The web site indicates the company is run by two lawyers who, based on their brief bios on the site, seem to be qualified and experienced Canadian lawyers. But the site and the company are not law firms. The site expressly states the services offered through it are not legal services of any kind. Rather, it provides merely “legal document filling services and related services. . . .”

While many parts of the site appear consistent with the theme of filing forms on customers’ behalf, other parts of the site would automatically generate full-blown documents, such as a shareholder agreement, based on questions and answers from the customer.

The shareholder agreement generated by the site contains legally complex provisions: “important decisions of the corporation,” buy-sell clause, right of first refusal, piggyback clause, drag-along clause, cash call clause, non-competition clause, non-solicitation clause, arbitration, and personal guarantee.

These are complicated contractual terms. Their suitability and enforceability depends in some cases on the unique circumstances of the situation. Based on my own experience and that of some of my colleagues, I would think many in the commercial litigation bar have litigated the meaning and enforceability of at least some of these clauses in commercial disputes.

One would argue this is a “do-it-yourself” site, where the vendor merely provides general information about different legal subjects or legal provisions, and the customer is responsible for deciding what services he or she wants to buy, and what types of clauses to include in a particular contract.

However, as with many things, life is more complicated than such a simplistic approach. If it is not straightforward for lawyers to draft and interpret some of these clauses and for courts to rule on their enforceability, how is a consumer supposed to make these sophisticated determinations through an online service, without even a minimum level of individual legal advice?

Efficiency is important; of that, there is no doubt. But converting complex legal problems to general commoditized forms, without taking care of individual requirements, is not an intelligent solution, and not in the best interests of the public.

Ontario’s 2012 Consumer Protection Act, which cannot be contracted out of, and perhaps equivalent statutes in other provinces, requires a minimum level of reasonable fit and quality of a consumer service. A “consumer agreement” is defined broadly in s. 1 of the act as “an agreement between a supplier and a consumer in which the supplier agrees to supply goods or services for payment.” Subsection 9(1) of the act provides the “supplier is deemed to warrant that the services supplied under a consumer agreement are of a reasonably acceptable quality.”

To that end, the company’s terms and conditions provide “to the fullest extent permitted by applicable law, CorporationCentre.ca expressly disclaims all warranties and conditions, express or implied. . . .” and goes on with a typical fulsome consumer-type disclaimer of fit and quality.

It is also interesting the web site’s general terms and conditions provide the services are construed in accordance with the laws of the Province of Quebec and the federal laws of Canada. So the purchase of a shareholders agreement for use in Ontario, an agreement which presumably has to comply with Ontario law, is purportedly a service subject to the laws of Quebec? That does not make a whole lot of sense from the perspective of protecting the rights of consumers.

In my opinion, this element of online virtual services by such enterprising vendors, where they relate to the drafting of complicated legal agreements, should come bundled with the necessary legal advice and should be customized to consumers’ particular circumstances and individual needs. That will go some distance to promote access to justice.

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