Ordinarily, third, or non-parties to a contract are not bound by its provisions. However, there are exceptions, as evidenced by a recent decision from the Court of King’s Bench in Alberta in the matter of Husky Oil Operations Limited v. Technip Stone & Webster Process Technology Inc., 2023, ABKB 545. In this case, the Court determined that if a third party intended to benefit from certain contract provisions, namely warranty, then the third party would also be bound by any terms and conditions relating to that warranty, including an obligation to arbitrate.

In our practice, mediating employment termination disputes is common. While in most cases both parties accept that the working relationship itself is over, there is often still work to be done in finalizing a mutually agreeable separation package. Specifically, we are referring to terminations ‘without cause’, such as restructuring or layoffs, in which an employer has opted to provide pay in lieu of working notice, typically referred to as a package. The value and composition of the package can either lead to quick settlement or give rise to a dispute, especially if certain types of non-salary compensation are omitted. This article’s focus is on equity-related compensation such as stock options and restricted share units (‘RSUs’).

For many in the private sector, especially those in early-stage/higher-risk enterprises, securities-based pay, for example, equity, stock options and RSUs, is an important part of a total compensation package.   But what happens if a company arbitrarily restricts or cancels this compensation, without other consideration?
A recent, unanimous decision by the Ontario Court of Appeal in Justein v. DeFi Technologies Inc. 2023 ONCA 615, affirmed that the arbitrary cancellation or withdrawal of stock options constituted oppression, pursuant to section 248 of Ontario’s Business Corporations Act R.S.O. c. B.16 (‘OBCA’).  Implicit in their decision was the confirmation that stock options are indeed a form of securities as contemplated by the Act.

“This litigation could have been avoided, in my view, had the parties then retained a professional mediator.”

When negotiating partnership and channel agreements, the choices of governing law and venue often take a back seat to the financial terms.  After all, the main goal of most such agreements is for the parties to make money together; any potential disputes and the process to resolve them become an afterthought, especially during the courtship phase.  However, this benign neglect can easily become a time bomb if the terms of the agreement are not evolved or updated in sync with changes in the business relationship.