Contracts cases. You know which ones I mean.
Remember that case where the judge rambles on and on about a series of share transfers so complex, you start to question whether the judge herself knew what happened? Or that case that made you check the Queen’s Law website to make sure “PhD (Economics)” wasn’t a prerequisite? Anyone recall that one with so many different parties, the diagram you drew to keep track of them all looked less like something usable in an outline and more like a Jackson Pollack painting?
Well, for those of you who enjoyed the hair-raising, page-turning, who-done-it thrills of my favourite 1L case Bauer v. Bank of Montreal,  2 SCR 102 (don’t worry Class of 2017, you’ll discover this little gem next semester), you’ll LOVE the newest humdinger out of the Ontario Court of Appeal excerpted below.
KAWASAKI KISEN KARPARTS LTD v. 2012578 ONTARIO LTD.
The judgment of the court was delivered by
GORGONZOLA J – The plaintiff corporation Kawasaki Kisen Karparts (“Karparts”) is a manufacturer of seals used in the automotive industry. Karparts’ position is that the contract at issue is enforceable because it was signed under seal. For perplexity, the facts of this case are reproduced ab infinitum below.
In 2009, Canada signed a European-Canadian Free Trade Association agreement (the “Trade Deal”). The result was a marked market increase in the price of materials, such as wax, plastic, metal, and rubber, used in seal manufacturing, which, in turn, led to higher price volatility in Karparts’ seals. Karparts was the sole provider of seals to the defendant company 2012578 Ontario Ltd (“Ontario”).
A series of highly complex transactions ensued between Karparts and Ontario following the Trade Deal. The transactions are too numerous and, for the purposes of the issue under appeal, unnecessary to reconstruct in these reasons. Regardless, I will analyze every transaction in turn as follows… [The 106-page analysis that followed is omitted].
In conclusion, only one transaction is determinative of the issue on this appeal: the contract of December 21, 2009.
On December 21, Ontario’s director, Arthur Bailey, appeared at Karparts’ main warehouse at 46 Pratt Street in Karton, Ontario to execute the contract. The office is 16’10” long by 16’8” wide. It has two windows. There is one door, used to both enter and exit the office. Covering the walls and ceiling are framed Karparts seals, mostly for decoration purposes.
At this office, Bailey and Karparts’ representatives signed a contract stipulating that Ontario would use Karparts as its sole seal supplier for 7 years. No seal was placed on the document. There was no consideration for Ontario having made the promise it did. Later, a dispute arose concerning a price increase demanded by Karparts in a proposed purchase order to Ontario. The dispute led to Ontario breaking the contract terms by signing a new supply contract with a Karparts’ kompetitor [sic]. Karparts sued for specific performance.
Because the contract was signed without consideration, but in the presence of Karparts’ seals, the question in this appeal is whether the contract was signed under seal.
In all contracts cases, trial judges must consider whether consideration flowed between plaintiff and defendant and vice-versa, whether the consideration was considerable, and any other considerable considerations. The trial judge in this case considered all of the above. We are so happy they did.
This case was difficult for any judge. It took course over a 231-day trial, involved over 6,700 individual documents, included testimony from 31 expert witnesses, and resulted in the hospitalization of a court clerk from the falling of 64 bankers’ boxes of evidence during closing remarks. We find no overriding or palpable error in the trial judge’s determination of the facts.
The legal test can be summarized into thirty-six distinct steps, all of which are reiterated below. [The first thirty-five steps are analyzed; Justice Gorgonzola continued] The last step is the most determinative and renders the previous thirty-five superfluous: was a proper seal attached to the contract?
Prior cases show that proper seals have included black dots, wax blobs, and even a “place seal here” sticker. In McDonalds Ltd. v. Hamburglar,  2 SCR 45, a grease stain was sufficient to enforce the promise not to steal food products from a chain of popular restaurants. The case of The Great Georgio Van Wurtzdaemiener (Re) (1902) AC 56 (Eng HL) involved a tragic, fractious, and bitterly fought contest between parents and a prominent children’s entertainer. A smiley face with the defendant’s trademark catch-line, “let’s do it for the kids, Vincenzo!” underneath was sufficient in the absence of consideration.
In no cases presented to this court were the seals in question not attached to the contract. Although the December 21 contract was signed under seal (in fact, under more than one), no seal was attached. We therefore conclude the contract is not enforceable.
Some say that a 231-day trial of this case was a waste of precious public resources, that Karparts had no case to begin with, and that seal law is archaic and rarely appears as a contestable issue in modern corporate law. Others say that a clarification of the law in this area was not needed. Others still question why the concept of seals is taught in law schools at all. We choose to leave the determination of these criticisms to another day.
Andrew Sapiano is in 2L and hereby acknowledges that due consideration was given and received for the publishing of this article.
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