Accepting contractual terms after choosing not to read its conditions is legally binding: Ont CA

When an individual makes a conscious decision not to read the terms of a contract in a stock award agreement but clicks on the confirming box that says they have read and understood the proposed agreement, they are legally bound by the terms, the Court of Appeal for Ontario has found.

In Battiston v. Microsoft Canada Inc., the court overturned a trial judge’s ruling that the respondent, Fransic Battiston, is entitled to unvested stock awards after termination due to harsh agreement terms because the trial judge failed to address that for 16 years, Battiston agreed to the terms of the stock agreement by clicking the confirming box. As a result, the court allowed the appeal with costs of $20,000 inclusive of disbursements and HST.

Lawyer for the respondent, Andrew Monkhouse, says the appeal court’s decision to legally bind his client to the terms of the agreement because he clicked a box confirming an understanding of the agreement terms is concerning because it creates a society where people could be bound by agreement terms that are extreme and hidden in contracts.

“If someone clicks on a box that says they’ve read and understood the agreement, the Court of Appeal was willing to find that that meant that they should actually be bound by that, and I think that’s something that should be a troubling precedent to most people in society.”

The dispute occurred when the appellant, Microsoft Canada Inc, terminated Battiston without cause after working for almost 23 years. As part of his annual compensation, he received a stock bonus under Microsoft’s yearly stock award agreements and, at the time of his termination, had 1,057 awarded but unvested shares.

Battiston brought a wrongful dismissal action before the superior court claiming his entitlement to previously granted stock awards vest during the notice period. Microsoft Canada contested the stock awards claim reliant on the stock award agreement, which states that any unvested stock awards do not vest to an employee if employment ends for any reason.

Battison’s stock bonuses were shared via email, directing him to a website to complete an online process and read and accept the stock award. He confirmed receiving the emails but said he accepted the stock awards agreement terms without reading them because the agreements were long.

Battiston argued that the stock awards agreements did not explicitly remove his entitlement to the vesting of stock awards during the notice period and that even if the language of the termination provisions dismissed his entitlements, the conditions were unenforceable because Microsoft Canada did not inform him of the termination provisions in the stock awards agreements.

The trial judge said the termination provisions in the stock awards agreements clearly and unambiguously limited Battison’s post-termination stock entitlements, and where one party presents a contract that contains a harsh or demanding provision, that provision must be called to the attention of the party entering the contract.

Accordingly, he ruled the stock terms were unenforceable because they were harsh and oppressive, and Battiston did not receive notice, granting him 24 months’ pay in lieu of reasonable notice, a 0.7 percent annual merit increase, an annual cash bonus of $12,100 and stock awards.

Microsoft Canada appealed the trial judge’s decision regarding the unvested stock awards alleging that the judge modified the legal test by adding an unfounded harsh, oppressive standard and erroneously ruled against them after concluding that the award agreements were unambiguous and not brought to Battiston’s attention.

They argued the trial judge erred in finding the termination provisions unenforceable because the Supreme Court decision in Matthews v. Ocean Nutrition Canada revised the test including bonus payments as part of damages in lieu of reasonable notice, and the stock award agreement was an agreement with the parent company, Microsoft Inc.

In rejecting the trial judge’s decision, the appeal court wrote, “each year, for 16 years, the respondent confirmed that he received these emails. His practice was to click a box to confirm that he had read, understood and accepted the stock award agreement. In fact, he said that he did not read the agreement and thus did not know about the termination provisions. He thought he would get the unvested stock if he was terminated.”

In the Matthews v. Ocean Nutrition Canada decision, Monkhouse says the Supreme Court states an “employer must bring the clause to an employee’s attention.” However, the court was persuaded by Microsoft Canada’s argument that they only needed to bring the entire plan to the attention of the Battitson as he certified that he read and understood it, which is not entirely consistent with the SCC’s decision in Matthews.

Monkhouse says Battiston is disappointed with the appeals court’s ruling, and the decision would be concerning to the average person considering the practical reality that a standard form agreement, when signed, should contain terms that are neither harsh nor oppressive.

“There were a number of arguments that we made that weren’t dealt with in the decision. It’s quite a short decision and we wish the court had been able to deal with those because I think that would have been meaningful to my client as part of this process.”

The lawyer for the appellant, Deborah Glendinning, says her client Microsoft Canada declined to comment.