Birch V Sequitury Case

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McGill Law Journal ~ Revue de droit de McGill PENALTY CLAUSES THROUGH THE LENS OF UNCONSCIONABILITY DOCTRINE: BIRCH V. UNION OF TAXATION EMPLOYEES, LOCAL 70030 ————CASE COMMENT———— Kevin E. Davis* he author reviews the recent case of Birch v. Union of Taxation Employees, Local 70030, in which the Ontario Court of Appeal evaluated—in terms of the doctrine of unconscionability—the enforceability of a clause fining union members who cross picket lines during legal strikes. He applauds the decision as an important step toward jettisoning the traditional common law penalty doctrine, according to which stipulated remedy clauses designed to have an in terrorem effect upon a contracting party are per se unenforceable. The author criticizes…show more content…
Will it make a difference if courts begin to analyze a particular legal problem under the rubric of one doctrine rather than another? In theory, new doctrinal lenses should bring different features of the problem into focus, and this should in turn lead judges to form different impressions of how the problem ought to be resolved. The Ontario Court of Appeal’s recent decision in Birch v. Union of Taxation Employees, Local 70030 casts doubt on this hypothesis.1 The majority’s decision in the case suggests that changing the doctrine used to analyze the enforceability of stipulated remedies will not necessarily affect the outcomes of future cases. Changing outcomes may require a more fundamental shift in judges’ understandings of stipulated remedies and their role in contractual relationships. Birch was preceded by a path-breaking line of cases in which Canadian appellate courts signalled their willingness to depart from the strict common law rule against enforcing a stipulated remedy that amounts to a penalty rather than a genuine pre-estimate of damages.2 Those cases marked a positive development in Canadian contract law, as adherence to the traditional rule against penalty clauses is difficult to justify. This is not to say that all penalty clauses ought to be enforced. But some of them should be enforced, while the reasons not to enforce the rest are more or less the same as the reasons not to enforce other contractual provisions. Consequently, doctrines such as unconscionability, mistake, and contra proferentem ought to be capable of addressing concerns relevant to the enforceability of stipulated remedies. There is no need for a rule that singles out penalty clauses for special treatment. Prominent commentators
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