|
By Bob Kuhn
CHURCHES, along with many other organizations, often
fail to recognize the need for great care when entering into contracts. A
recent B.C. Supreme Court decision shows the types of problems that can
result from poorly drafted agreements.
In 1989, St. Vartan Armenian Apostolic Church of
British Columbia entered into a contract with the predecessor of Alderwoods
Group Canada Inc., the owner of Victory Memorial Park Cemetery in Surrey.
St. Vartan believed it had reserved portions of the cemetery for the
use of the members of the Armenian community. Under the contract, 800
burial plots were to be reserved with the right of first refusal granted on
a further 800 plots.
St. Vartan would encourage its members and those in the
broader Armenian community to purchase their burial plots in the area of
the cemetery set aside specifically for Armenians. Presumably they would
buy other death care services such as grave markers from Alderwoods. In
return, a portion of the revenue generated by Alderwoods through St. Vartan
referrals would be donated back to St. Vartan.
However, between 1989 and 2005, members of the Armenian
community purchased less than 300 burial plots. Alderwoods was running out
of unreserved space, and the value of the burial plots had increased
dramatically since 1989.
The problem was that the St. Vartan contract did not
say how long the right were to last. Nor did it give either party the right
to unilaterally terminate the contract on reasonable notice or otherwise.
Nevertheless, Alderwoods gave St. Vartan written notice
in September 2005 that in three months time it intended to terminate the
contract. They invited St. Vartan to encourage the Armenian community to
purchase burial plots during this three-month period at the reduced
contract rate. In response, St. Vartan commenced a court action seeking to
enforce the contract.
Should a contract be subject to termination if there is
no express right to do so?
In dealing with the question, “Should the court
imply a term into the contract giving Alderwoods the right to unilaterally
terminate the contract upon reasonable notice?” the court stated:
Continue article >>
|
“The main objective of the agreement was to
provide a parcel of 800 burial plots for this particular ethnic or
religious group. Each individual from the Armenian community who purchased
a burial plot in the parcel did so on the basis of the agreement which
guaranteed that he or she would be buried in an area dedicated solely to
Armenians.
“Unilateral termination by the cemetery on
reasonable notice is not consistent with the overall objective or intent of
the contract.”
The court held there was no requirement to imply a
termination clause in order to make the agreement work. Instead, the court
found that the parties contemplated the agreement would last for 80 years,
the longest permitted according to the Perpetuity Act.
As a result, the church won – and the court
upheld the contract. Interestingly, the court refused to substitute
monetary damages instead of enforcing the agreement, because the scheme was
marketed as a unique opportunity for individual Armenians to “show
their cultural or religious expression,” and damages would not be an
adequate remedy. The court ordered Alderwoods to pay St. Vartan more than
$17,000 to account for their share of the burial plots already sold.
Churches need to be very careful when they enter into
contracts – ensuring that they accurately record what has been
agreed, and provide for an acceptable exit strategy if things do not work
out as originally intended.
Bob Kuhn is an Abbotsford lawyer.
September 2008
|
