We all get receipts. At a B2C and B2B level. Sometimes we or our colleagues review them carefully. Often not. We might get a general sense the numbers are right and file them. Without careful consideration of the terms of the receipts.
But not all receipts have the same legal significance. Some create binding contractual terms. Particularly receipts in the warehouse and logistics industry.
We offer the following thoughts for consideration to storers and their clients in the warehouse and logistics space:
(a) where time and opportunity permit, enter into a contract which defines with as great clarity and precision as possible, the charges and other terms and conditions that will govern the rates to be applied for labour and storage of the different goods being stored and delivered, if applicable; and
(b) where for one reason or another, the entering into of such contract does not prove possible, consider issuing warehouse receipts to impose the clarity and certainty being sought.
What is the “warehouse receipt” to which we make reference?
The Warehouse Receipts Act
Let’s assume the following scenario.
Goods are moved by an owner/bailor into a warehouse for storage. Perhaps basic storage. Perhaps something more involved – such as would be the case with third party logistics. No contract? Yikes.
What should the storer do? Push to get a reasonable contract signed. Yes. In the interim? Send a warehouse receipt setting out the terms to act as a contract pending the contract being signed.
In Ontario, warehouse receipts are governed by the Warehouse Receipts Act (the “Act”). According to the Act, a “warehouse receipt” means an acknowledgment in writing by a storer of the receipt for storage of another’s goods. To attract the protections and benefits of the Act, the warehouse receipt is a receipt that must contain, among other things, the description of the goods or of the packages containing them and the rate of storage charges for those goods (s 2(1) of the Act).
But it can specify much more. A storer may insert in a receipt any other term or conditions that are not contrary to the Act and that do not impair the storer’s obligation to exercise such care and diligence as a careful and vigilant owner of similar goods would exercise in similar circumstances (s 2(4) of the Act). While the Act does not specify any examples, possible terms could include time for payment, the consequences of non-payment (e.g., interest rates for late payment, whether a lien would arise over the goods, etc.), and limitations of liability.
Importantly, the Act provides that a warehouse receipt, when delivered to the owner or bailor of the goods or mailed to their latest address, constitutes the contract between the owner or bailor and the storer, provided that the owner or bailor does not dispute the terms on the receipt within 20 days of receiving the warehouse receipt (s 2(5) of the Act).
What happens if the owner/bailor disputes some or all of the terms set out in the receipt within the applicable time? According to the Act, the owner/bailor can notify the storer in writing that they do not accept such contract, and “thereupon the owner or bailor shall remove the goods deposited subject to the storer’s lien for charges” (s 2 (5) of the Act). This section primarily protects the storer. The Act does not address a situation where both the storer and the owner/bailor wish to continue the warehousing arrangement, as long as they can negotiate terms to their satisfaction. In such a situation, the storer and the owner need to agree on mutually acceptable terms for storage or the storer must ensure the owner removes the goods from the storer’s premises.
Similar legislation exists in other provinces. That is, legislation which recognizes a warehouse receipt as being able to form a contract, if the owner or bailor of the goods does not dispute the terms therein within the specified statutory period. (see, for instance, s 3 of the Alberta Warehouse Receipts Act and the Manitoba Warehouse Receipts Act).
Canadian Courts give force to Warehouse Receipts
The status of warehouse receipts as a contract has been recognized by courts. In Evans Products Co. v. Crest Warehousing Co., [1979] S.C.J. No. 96, the Supreme Court of Canada upheld a limitation-of-liability clause on a warehouse receipt. The warehouse operator included, on the reverse side of each warehouse receipt, a clause limiting its liability to $50.00 on any one package or stored unit. The customer argued that the limitation clause violated the Act, as the Act did not allow any terms that impair a storer’s obligation to exercise care and diligence in regard to the goods.
The Supreme Court’s majority rejected the customer’s argument and ruled in favour of the storer, upholding the validity of the clause.
The Takeaway
Think of how to possibly use warehouse receipts for your protection and, more generally, to advance contractual terms that you wish to secure.
At CP LLP, we can help you use warehouse receipts to your advantage – and to manage or influence the outcome of disputes that flow from their delivery.
If you are facing disputes related to any warehousing or logistics contracts, reach out to our dispute resolution team.
Disclaimer: This newsletter is for informational purposes only and should not be used as a substitute for competent legal advice from a licensed professional in your region.
Dan Chitiz