Page 28 - CCCA 239285 Magazine_Fall 2015

{ Feature }

second set of eyes—whether in-house or external counsel—to
“Don’t rely exclusively on your termination review the contractual provisions in question to ensure that
rights, even if you are legally entitled to the interpretation being adopted is justifed and legally correct.
do so under the letter of the law.” Simply put, a robust analysis of contractual provisions is the
Catherine Chow, Director of Legal Services, starting point in any course of action when considering wheth-
Keg Restaurants Ltd. er to terminate a contract.”
In-house counsel also need to ensure that there is a clear and
proper process in place on how the decision to terminate a con-
Regardless of whether in-house counsel have dealt with such tract was reached, and that all parts of that process are docu-
situations in the past, it’s imperative that they establish the mented clearly, “so if there is ever an allegation brought forth
proper procedures and practices to ensure their organizations by the terminated party that something was not performed
act in good faith and honestly when terminating their con- honestly, there is a record that will show precisely how it is this
tracts—and that this happens during every step of the process. process was followed and how it is that the decision was made
This needs to take place not only with the contracting party, but to terminate the other party,” explains Lederman.
internally within an organization as well. In many ways, this requires having clear and consistent com-
From an internal perspective, in-house counsel need to do munication about the termination and the reasons for it both
thorough investigations to determine the reason a contract is be- internally as well as with the terminated party. “You need to be
ing terminated, says Catherine Chow, Director of Legal Services honest internally and with the contractor about the reasons for
for Keg Restaurants Ltd. in Burnaby, B.C. “As corporate counsel, termination,” says Mallon. “You don’t want to give a different
you have more of an obligation to review why this termination message than the truth.”
is occurring: what is the context, what is the relevant historical And when it comes to discussing the matter with the party
background, what are the relationships that the contractor you’re that’s being terminated, you need to be more circumspect, ad-
terminating has with other businesses or business lines.” vises Lederman. In fact, although you may be complying with
To do that properly, in-house counsel need to work effec- the strict terms of the contractual right to terminate the con-
tively with other departments within their organizations to not tract, if your communications are perceived as dishonest, this
only get a true understanding of the reason for the termination, could lead to a claim. “So, as a practical matter,” he says, “you
but to ensure there’s proper records that justify the organization need to script the discussion you’re having with the party that is
is making the right decision, explains Glenda Mallon, Assistant being terminated to ensure that nothing is said that isn’t or can’t
GC with Ryerson University in Toronto be perceived or argued to be dishonest.”
“You need to sit down with the business unit and have a But above all, one of the most important responsibilities that
frank discussion about the cause of the termination. If it’s per- in-house counsel need to fulfl in this new paradigm is to com-
formance related, you need to have all the documents readily municate and educate their organizations—especially those
available to back it up,” she says. “You also need the business within who maintain the relationships with contractors—about
unit to be honest about what has been said between the parties. the importance of acting on good faith principles.
Then, the organization needs to weigh the costs and the benefts
of terminating the contract—not just the legal but the fnancial
and reputational.” “The organization needs to weigh the
Taking these considerations into account requires looking costs and the benefts of terminating
beyond just the scope of the law and what’s actually required of the contract—not just the legal but the
the parties in the contract. “Don’t rely exclusively on your ter- fnancial and reputational.”
mination rights, even if you are legally entitled to do so under Glenda Mallon, Assistant GC, Ryerson University
the letter of the law,” Chow says. “As corporate counsel, I would
not just look at the contract. I would go and talk to the business
unit frst about the factual background before making a legal “You have to ensure that you can demonstrate why, in the
opinion and a recommendation, which are different things. So, long run, it’s more benefcial for the company to be compliant
my legal opinion may be, ‘Yes, we can terminate by the strict let- and act in good faith not just because this law can trip you up,
ter of the contract,’ but my recommendation may incorporate but because there are many benefts to being on the right side
other business factors. That requires a bigger perspective and of this,” Preston says. “And those will come as the organization
that’s what GCs are required to do, which is be business advisors expands internationally and deals with other jurisdictions that
with an ability to weigh the legal consequences.” have these principles baked in, and if it becomes a signifcant-
Fulflling both those roles is critical during a termination, ly sized company, it’s also something that investors and other
and an important task that in-house counsel need to take on is stakeholders will measure you by.” ❚
to review the contract objectively to make sure the termination
is actually allowed. McGrath says: “Many contractual provisions
are often open to interpretation, and it is imperative to have a Pablo Fuchs is a writer based in Toronto.

28 CCCa MaGazIne | FaLL 2015 auTOMne