Many contracts contain forum selection clauses, which tell the parties to the contract where legal disputes over the contract will be litigated. For example, a contract between two businesses could say that any litigation arising from the contract must be brought to the Ontario Superior Court of Justice.
Forum selection clauses play an important role in contractual relationships, because they create certainty and security for the contracting parties. The Supreme Court of Canada has called certainty and security “critical components of private international law”. However, Canadian law has come to recognize the differences between forum selection clauses in commercial litigation contexts and consumer contexts.
In Douez v Facebook, Inc., a 2017 Supreme Court of Canada case, Facebook argued that the forum selection clause in its terms of use should force the plaintiff, Douez, who was a Facebook user (i.e., a consumer) to sue Facebook in California rather than in British Columbia. The Supreme Court disagreed for several reasons, including because of the inequality of bargaining power between Facebook and its users. This inequality was put into greater relief due to the fact that the terms of use for Facebook are a “contract of adhesion”, which means that the party with greater bargaining power (Facebook) provides a pre-drafted contract to the weaker party (Douez) who has to either accept or reject it. In this context, where there was no opportunity for Douez to negotiate, the Supreme Court said that “individual consumers … are faced with little choice but to accept Facebook’s terms of use”.
Another reason that the Supreme Court disagreed was because Douez sued Facebook for a violation of her privacy rights, which have “quasi-constitutional status”; therefore, the Supreme Court said, it was important for a local court to interpret her rights under the Privacy Act, because this would “provide clarity and certainty about the scope of the rights to others in the province”.
More recently, in Gorenstein v Meta Platforms, Inc., a 2025 Federal Court case, the plaintiff, Gorenstein, sued Meta for suspending her account which caused her to lose business income. Gorenstein ran a business in Vancouver, and she used Instagram to engage business and to promote sales. Meta relied on a forum selection clause to argue that the lawsuit should not be allowed to proceed. The Federal Court agreed, because this was a commercial context rather than a consumer context. In order to advertise on Instagram, Gorenstein had to agree to both the Terms of Use and the Ad Terms. The Ad Terms provided that any claim arising from the Ad Terms would be subject to the dispute resolution clause in the Commercial Terms. The Commercial Terms stated that commercial claims between individuals who reside outside the United States or whose business is located outside the United States had to bring their claims in a California court except Irish individuals and businesses.
The Legal Test
For both commercial and consumer contexts, the legal test is the same. It has two steps:
- the party seeking to enforce the forum selection clause must show that the clause is clear, valid and enforceable, and that it applies to the claim before the Court; amd
- if the clause succeeds at the first step, the plaintiff must show that there is “strong cause” not to enforce the clause. Strong cause includes “all the circumstances of the particular case, including public policy considerations relating to the gross inequality of bargaining power between the parties and the nature of the rights at stake”, as well as the “convenience of the parties, fairness between the parties and the interests of justice”.
In the consumer context, the courts will tend to give more weight to the public policy considerations like inequality of bargaining power, especially where they are dealing with a contract of adhesion. Meanwhile, in the commercial context, the “strong cause factors have been interpreted and applied restrictively”, because it is desirable for parties to have certainty at the outset of their contractual relationship.
Takeaway
As a business, you should be aware of whether the relationship that your contract governs is a consumer relationship or a commercial relationship. It is important to have different contracts for both of these contexts for many reasons; for the purposes of this article’s topic—forum selection clauses—we note that, especially where the contract is one of adhesion, courts will tend emphasize the inequality of bargaining power between corporations and consumers. In the commercial context, the emphasis shifts back to the traditional contractual principles described above, such as certainty and security.
As a consumer, especially in the context of contracts of adhesion, such as terms of use for an online platform, it is important to know your rights and understand the inequality of bargaining power between yourself and the party whose contract you are signing. It is also important to understand that if you are suing for business losses, even if you did not purchase an advertisement, you may be held to the clauses in a contract that govern business disputes.
Should you have any questions relating to forum selection clauses, contract litigation, or any other commercial litigation, please do not hesitate to reach out to one of Walker Law’s experienced litigation lawyers.
Tags: Civil Litigation Law, Contract Disputes, Commercial Litigation Law, Appeals