Clerks and Corporate Officers Forum

Best Practices for Municipal Contracts

These materials were prepared by Michael McAllister, Colleen Burke and Lynda Stokes of Murdy McAllister, October 18, 2012

CONTENTS

I. INTRODUCTION.................................................................................................1

II. THE BASIC ELEMENTS OF AGREEMENT......................................................1 A. Creation of Contract…...................................................................................1 B. Recitals..........................................................................................................2 C. Boiler Plate Clauses.......................................................................................3

III. LEGALITY AND CAPACITY..............................................................................3

A. Authority.........................................................................................................3 B. Delegation……...............................................................................................5 C. Duration (Term)………………........................................................................6

IV. OTHER CONTRACTING ISSUES......................................................................6

A. Fettering.........................................................................................................6 B. Privacy of Information....................................................................................7 C. Purchase Order…..........................................................................................7

V. PROCUREMENT................................................................................................8

A. Generally…………………..............................................................................8 B. Invitation to Bid or Tender…………………………..........................................9 C. Request for Proposals or Expressions of Interest………………....................9 D. Procurements Over $75,000: Interprovincial Trade Agreements……….……9

VI. LAND USE AGREEMENTS..............................................................................11

A. Real Property in British Columbia................................................................11 B. Leases and Licences...................................................................................11 C. Easements and Statutory Rights of Way.....................................................11 D. Restrictive Covenants And Statutory Covenants.........................................11

VII. CONCLUSIONS................................................................................................14

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I. INTRODUCTION

This paper is not intended to be a dissertation on the law of contracts. Rather this paper is a general overview of the area of law that is intended to focus on our firm’s observations, as municipal solicitors, of common pitfalls and easily avoidable mistakes that routinely arise.

II. THE BASIC ELEMENTS

A. Creation of a Contract

A contract is a written or spoken agreement intended to be enforceable by law. The basic elements of a contract are an intention to be legally bound, and an offer and acceptance and consideration. Parties do not always intend for their agreements to be legally enforceable. An agreement may be framed as a "memorandum of understanding" and express a convergence of will or policy between parties or an intended common line of action or to define a relationship between closely related entities, but not constitute a legally enforceable contract. Whether or not a document that purports to be a memorandum of understanding constitutes a legally binding contract will depend in part on the exact wording used in the agreement. It is a matter of substance, not form. The agreement may include express disclaimers of legal effect, but it may also include contradictory terms that purport an intention to be legally bound. To constitute a contract, there must be an offer by one person to another and an acceptance of that offer by the person to whom it is made. A mere statement of a person's intention, or a declaration of his or her willingness to enter into negotiations is not an offer and cannot be accepted so as to form a valid contract. An offer is an expression of willingness to contract on specific terms with the intention that if the offer is accepted, the offeror will be bound. An offer must be a clear, unequivocal and direct approach to another party to contract. Certainty of terms is a condition of a valid offer. It is important to distinguish an offer from an invitation to treat, which is an invitation for other people to submit offers. An advertisement, a display in a shop or an invitation to submit a tender are examples of invitations to treat, not offers. An acceptance is an expression of absolute and unconditional agreement to all the terms set out in the offer and may be oral or in writing. The acceptance

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must exactly mirror the original offer made, otherwise it will be considered a counter-offer. A counter-offer is not the same as an acceptance and a counter-offer extinguishes the original offer so that one party cannot make a counter-offer and then decide to accept the original offer. A request for information is not a counter-offer, so if one party asks the offeror for information or clarification about the offer, the offer will not be extinguished and the party can still accept the offer. In the context of contract law, “consideration” refers to the new or fresh value being exchanged between the parties. The exchange of values makes a contract different from a gift. Consideration can be anything given or promised by one party in exchange for the promise or undertaking of another party. However, past consideration does not count as good consideration. Typically, under a contract, one party receives a benefit or advantage in return for a promise to carry out some action or refrain from exercising a right to do so. The most obvious example of consideration is monetary value or a price expressed as a dollar figure. Consideration may take forms other than a dollar figure, for example one party may agree to do something in return for the other party doing something. Generally, courts leave it up to the contracting parties to decide whether the consideration being exchanged in an agreement is adequate, but if there appears to be no consideration, then a court may decide that the contract is not valid or legally enforceable. To avoid this risk, a “consideration” clause is often included at the beginning of an agreement, following the recitals, clarifying that the parties acknowledge the sufficiency of consideration. Where consideration is based on intangibles or does not specify price, a nominal value may be cited as having been exchanged. For example:

NOW THEREFORE, in consideration of the mutual terms, conditions and covenants contained herein, the receipt of ten dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which is acknowledged by both parties, the parties agree as follows:

Including such a consideration clause in an agreement is often a prudent approach to manage the risk of challenge to the validity of an agreement where no price value is stated, such as a covenant that imposes restrictions and requirements on a property owner, for which the owner ostensibly receives nothing in return.

B. Recitals

Written agreements often include "recitals", which set out facts to provide background information and the context for the contract. Recitals usually

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follow the word "Whereas" or "Background" at the beginning of a formal, written agreement. Recitals are not crucial to an agreement; they are not expressions of contractual obligations. The value of recitals is with respect to understanding or interpreting the contract. Recitals help establish the context and clarify the purposes of a particular agreement and define terms that are used in the agreement. When considering how to resolve a contract dispute, courts may refer to the recitals for guidance in order to assess the contracting parties' intentions.

C. "Boiler Plate"

The term "boiler plate" is often used to describe terms in a contract that are considered standard and routine. Generally speaking, such clauses have developed from historical common law and equitable principles. Examples of "boiler plate" clauses include the jurisdiction for interpreting and litigating the contract, insurance requirements, enurement with respect to successors and assigns, assignment rights, execution requirements, arbitration or other dispute resolution provisions, notice requirements, "entire agreement" provisions and clauses that assist with interpreting the contract . Standardization may result in greater efficiency in the preparation of legal documents, but care should be taken to review such clauses to ensure that they are applicable to the agreement at hand and to ensure that they are acceptable, particularly where another party has drafted the agreement and presented it as their standard form of agreement.

III. LEGALITY AND CAPACITY

A. Authority

An agreement must be within the authority of the local government to enter, and must not be contrary to law generally or inconsistent with statutes and regulations that may apply. The Community Charter, section 8(1), provides that a municipality has the capacity, rights, powers and privileges of a natural person. Basically, this means a power to enter contracts and to sue and be sued, as if it were an individual. The “natural person” power is still subject to a variety of conditions and restrictions set out in the Community Charter, the Local Government Act, and a variety of other statutes. A municipality must always exercise its powers in accordance with applicable statutes.1

1 Community Charter, section 8 (10)

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A municipality differs from an ordinary business corporation, or a society having non-profit objectives, in that, instead of having shareholders and members, it consists of the residents within a certain geographic area. It operates through its council of their elected representatives (or through its board, in the case of a regional district), whose members must make decisions according to their view of the public interest.2 Council usually may enter contracts by a simple majority resolution, but in some circumstances, additional statutory conditions must be met. For example, public notice is required for disposing of lands or improvements.3 To exchange or dispose of park lands, a bylaw that has been approved by the electors (a counter-petition process) is required.4 Approval of the electors is also required where a contract would incur municipal liability of a capital nature, or in the form of a loan guarantee, for more than 5 years, or that could exceed 5 years by exercising rights of renewal or extension.5 Borrowing, lending, guaranteeing repayment, or providing security for borrowing may not only require a special form of bylaw, and approval of the electors, but also approval of the municipal inspector (Ministry of Community, Sport and Cultural Development). Regional districts are corporations that may enter into contracts, sue and be sued, and do many of the same things as municipalities, except that regional districts have not been conferred “natural person powers”. Like municipalities, regional districts are subject to specific limitations and conditions set out in the Local Government Act and other statutes, but their authority is somewhat more restricted. Where the statute is silent as to whether a regional district is authorized to enter a particular kind of contract, or even is ambiguous in that regard, one should not readily assume it may do so. Because local governments are subject to various statutory conditions, restrictions and requirements, depending on what is being contemplated, it is important to confirm, in the earliest stages, that statutory authority exists, even if generally stated, and to confirm what conditions, restrictions and requirements may apply. The “natural person” power should not be confused with the regulatory power of local governments, although it is possible to enter contracts for the provision of regulatory services, such as for the administration and enforcement of bylaws.

2 CC, section 115

3 CC section 26

4 CC section 27

5 CC section 175

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In some circumstances it is possible to “contract out” of a statute, but in other cases, especially where the statutory rights of others could be adversely affected, it is not possible. One example is that a local government cannot make a contract that is inconsistent with information and privacy legislation.6 This should be kept in mind when negotiating agreements with American service providers that would involve access, collection, disclosure, and storage of personal information. For a contract to be enforceable by a local government, the other party must be legally competent to enter the agreement. The party must have legal capacity as a “person,” which may be an individual, registered business corporation or society. Where a local government contemplates an agreement with a sports or community group, it may need to consider whether the group is an incorporated entity or if it is collection of individuals. Generally, an individual may be considered competent if over the age of majority (in B.C., 19 years) and not subject to a mental disability. The issue of legal competence can be important in relation to obtaining waivers of liability for municipal volunteers and program participants who may lack capacity who are involved in various programs in recreational departments.

B. Delegation

Generally, council of a municipality or the board of a regional district delegate signing authority to specific persons so that they may execute contracts on behalf of the municipality or regional district. Where Council might enter a contract by a simple resolution, it is generally able to delegate that power to an administrative official as an alternative. Such a delegation of power may be generally expressed, but should be clearly set out in a bylaw7 - otherwise, a contract that has been entered into and signed by a municipal official on behalf of the municipality potentially could be declared invalid by a court, based on a failure to meet statutory requirements. On the basis that municipal councils are equivalent to being “trustees” for the assets of the local residents, the courts have traditionally held that local governments are not subject to the “indoor management” or “ostensible authority” rule that applies to ordinary corporations. This means that a person seeking to contract with a local government must ensure that the person who appears to represent that body is indeed properly authorized to enter a legal agreement on its behalf.8

6 Information & Privacy Commissioner Order 00-07, Re Malaspina University-College Records

[2000] B.C.I.P.C.D. No. 51 7 Community Charter, sections 122 (2); 154 (1)

8 Silver’s Garage v. Bridgewater (Town) [1971] S.C.R. 577; Eastern Securities Co. v. City of Sidney [1923] 4 DLR 717

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The courts have modified that special rule somewhat, however, so that municipalities cannot freely accept benefits from hopeful contractors without concern about potential claims for compensation. In some circumstances, an equitable doctrine such as unjust enrichment or quantum meruit may apply to award payment for work or services performed even in the absence of ordinary authority to contract. 9

As well, where a contract is signed by the mayor and clerk, the courts will assume the agreement has been approved by Council, as these persons are generally in the best position to know what happens at Council meetings. This “presumption of regularity” may be difficult to overcome if the minutes of Council meetings are not clear as to whether a particular contract was approved, rejected, or even considered.10

C. Duration (Term)

The term of the agreement, in the context of its expected duration or time of being in force, should be stated clearly. You may also want to include a period for which the parties may notify each other as to extending, renewing or renegotiating the agreement. There may be statutory rights, limits and conditions for agreements; for example where over 3 years (leasing rights); 5 years (liabilities) and long term agreements (franchises – 21 years). Some contractual promises may need to provide for their extending beyond the ultimate term of the agreement, such as for insurance and indemnity clauses, which could otherwise become ineffective to protect a municipality in the event of a claim or complaint arising after the term has expired.

IV. OTHER CONTRACTING ISSUES

A. Fettering

A local government contract may not effectively determine in advance a decision by the Council or Board acting in its legislative or policy-making capacity. Council members must be free to vote on various matters according to their view of the public interest, as opposed to such a vote being “fettered” by contract.

9 Pacific National Investments v. Victoria [2004] 3 S.C.R. 575; Bond v. Esquimalt 2006 BCCA 248

10 See Canada Safeway v. Surrey (City) 2004 BCCA 499, appeal to Supreme Court of Canada dismissed [2004] SCCA

577. In that case, the city was trying to resile from an agreement for which there was no evidence of Council having approved it, despite the mayor and clerk having purported to execute it under seal. The city could not prove Council had not approved it: the Court of Appeal held the City as bound by the agreement.

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B. Privacy of Information

Although this area of law is a broad subject on its own, and can be complex, some basic rules should be kept in mind when contemplating an agreement for services, especially where the service provider is a private sector organization or consultant, and not ordinarily subject to the Freedom of Information and Protection of Privacy Act (FIPPA) FIPPA. FIPPA requires that public bodies protect the confidentiality of certain kinds of “personal information” under their custody or control. This means information about individuals, other than information that enables an individual to be contacted at a place of business (name, position or title, and business telephone number, address, email or fax).11 Local governments must take reasonable measures to secure such information against unauthorized access, collection, use, disclosure or disposal.12 An employee, officer or director who has access to personal information - whether or not the access is authorized – must not disclose it, except as authorized under FIPPA.13 Service providers and their employees, officers and directors are also subject to these requirements and restrictions.14 If the information is to be accessible from outside Canada, or even stored outside Canada - for example, electronically, through internet, or via “iCloud” - that may only be in circumstances listed in section 33.1 of FIPPA. Although private organizations are subject to confidentiality requirements under their own legislation, the Personal Information Protection Act, a person contracting with a local government may be unaware of the FIPPA obligations that are triggered when, pursuant to a service contract, business or personal information is shared that would otherwise not be available to the other party. As to protection of sensitive business information, a private corporation or contractor may be accustomed to a far greater range and level of confidentiality than public bodies may be able to give such records, at law. While on the face of it, FIPPA section 21 suggests that the confidentiality of third party business records is well protected, in resolving disputes about access requests, and despite third party expectations and arguments, the Information and Privacy Commissioner has interpreted the section strongly in favour disclosure – not only of contracts that are complete, but of various business records that are related to the agreement in its final form. To date, the courts have upheld these interpretations. 15

11

FIPPA Schedule 1, definitions: “personal Information”; “contact information”. 12

FIPPA section 30. 13

FIPPA section 30.4. 14

FIPPA section 31.1. 15

Canadian Pacific Railway v. British Columbia (Information & Privacy Commissioner) 2002 BCSC 603; K-Bro Linen Systems Inc. v. British Columbia (Information & Privacy Commissioner) 2011 BCSC 904

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Contractual provisions that draw attention to the duties under FIPPA of public bodies and their service providers may help avoid misunderstandings that could otherwise result in placing both parties in a compromised position under the Act. As well, if personal information requirements are breached by a contractor, a local government might then pursue remedies under the contract itself. At its most simple, such a provision would reference FIPPA and the service provider’s understanding the obligations of itself and the local government under that Act.

C. Purchase Order

Of all forms of contract used by local governments, purchase orders give rise to an inordinate number of problems. The principle reason for this, is that the principles of a contract discussed above are all too often ignored.

V. PROCUREMENT

A. Generally

Procurement is a specialized type of contract law. In Canada, procurement that involves competitive bidding imposes a duty of fairness on the owner towards those who respond to an invitation to tender (bid) by meeting its essential rules and conditions. In recognition that proponents may incur substantial costs in preparing to meet the requirements set out in an invitation to tender, the courts are concerned that the bidding process be conducted in an even, transparent manner, so that from an objective viewpoint, the best compliant bid may succeed.

As an owner seeking bids for a contract, a local government may create the rules and conditions and may include “privilege clauses” that allow for some discretion. A common example is a clause where the owner reserves to itself the right to not award a contract at all, or to award a bid that may not be for the lowest price. Other criteria may be equally or even more important: specific expertise and prior experience, a claim-free history, scheduling ability, etcetera. However, once the call for bids is released, the owner must not accept non-compliant bids. A compliant bid leads to an initial contract between the municipality and the successful bidder: “Contract A”. Contract A is typically followed by more detailed negotiations and arrangements that are incorporated into a substantive agreement between the parties: “Contract B”.

The courts have, on some occasions, ordered an owner who awarded a contract to a non-compliant bidder to pay compensation to the competitor whose bid, despite being compliant, was not accepted. A notable example

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was the decision in Tercon Contractors Ltd. v. British Columbia (Minister of Transportation).16 In this case, the request for proposals had an exclusion clause that purported to bar claims for compensation from bidders “as a result of participating in the tendering process”. The court held that the clause did not, when properly interpreted, bar Tercon’s claim as the unsuccessful bidder. The tendering contract and required approval process stated expressly that the Province would be bound to accept bids only from eligible bidders. By considering a bid from a party that had, by a joint venture with another company, become an ineligible bidder, the Province not only breached the express and implied terms of Contract “A”, but also did so in a manner that was, in the court’s view, “an affront to the integrity and business efficacy of the tendering process”.

B. Invitation to Bid or Tender

An invitation to bid or tender is an offer which typically is specific as to the essential rules, conditions and requirements that bidders must meet during the period of time for which bids are received.

C. Request for Proposals or Expressions of Interest

A request for proposals tends to be less than specific, and for expressions of interest, even less so.

D. Procurements Over $75,000: Interprovincial Trade Agreements

The Agreement on Internal Trade (AIT) which came into force in 1994 and includes the federal government and all provinces, contemplated further bilateral and multilateral agreements among the signatories that would enhance interprovincial trade.17 The Trade, Investment and Labour Mobility Agreement (TILMA) of April 1, 2009, between British Columbia and Alberta was the first of these, but it has been effectively replaced by the New West Partnership Trade Agreement (NWPTA). The NWPTA came into force on July 1, 2010 and is between Saskatchewan, Alberta and British Columbia.

Under NWPTA, standards and regulations established by governments must not restrict or impair interprovincial trade, investment and labour mobility, 18and government entities (including local governments) must not “discriminate”, i.e., give preference to the goods, investments or people within the province except where the actual cost differences are justified.

Through NWPTA, as well as its predecessor TILMA, the Province intends that local governments, and any corporations or entities that they own or control,

16

2010 SCC 4 (Supreme Court of Canada) 17

AIT, Article 1800. 18

NWPTA, Articles 3 and 4.

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will adhere to the agreement when engaging in procurement processes for goods and services over established threshold amounts, except for goods and services that are not otherwise exempted.

The thresholds for procurement amounts for local government (MASH sector) adherence to NWPTA are $75,000 for goods or services, and $200,000 for construction contracts. Over these amounts, the provinces must “ensure that procuring government entities post tender notices for all covered procurement through an electronic tendering system or systems provided by the Party”. 19

TILMA had given rise to concerns about restrictions against regulatory measures and municipal freedom to prefer local goods and services. Following discussions with the Union of British Columbia Municipalities in the development of TILMA, certain subjects of local government regulation were exempted, and continue to be exempted through NWPTA. Among them are:

land use decisions such as zoning for use, height, signage (except that such regulations must not discriminate); 20

water, and services and investments related to water; 21

promotion of renewable and alternative energy;22

management and disposal of hazardous and waste materials; 23and

Aboriginal peoples.24

A number of other exemptions also apply to government entities generally, as long as procedures are not used by a procuring party to avoid competition or discriminate between suppliers. These include procurements:

where it can be shown that only one supplier can meet the procurement requirements,

for urgent situations,

where no bids were received,

of goods purchased for representational or promotional purposes,

for acquisitions of a confidential or privileged nature,

of goods intended for resale to the public,

for lawyers and notaries,

of health and social services,

by public bodies and non-profit organizations, and

by entities that operate sporting or convention facilities in some circumstances of commercial contract.25

19

NWPTA, Article 14.3 20

NWPTA, Part V. A.1 (g) 21

NWPTA, Part V.A.1 (b) 22

NWPTA, Part V.D.2 23

NWPTA, Part V.H.1. 24

NWPTA, Part V.A.1 (a)

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Failure to comply with NWPTA may result in triggering the dispute resolution process (a panel under the Agreement. Provisions for monetary penalties contemplate maximum awards of $5 million dollars, but these provisions do not apply to disputes relating to procurement measures or specific procurements. 26

While the government clearly expects that local government bodies will comply with the NWPTA, to date there is no legislation that clearly requires this. Note that under municipal legislation, the general corporate powers of municipalities and regional districts are stated as being subject to any specific conditions and restrictions established by statute.27

VI. LAND USE AGREEMENTS

A. Real Property in British Columbia

From a legal perspective, property is not a "thing" that belongs to someone, it is thought of as "a bundle of rights". Land is defined under the Interpretation Act as including "any interest in land, including any right, title or estate in it of any tenure, with all buildings and houses, unless there are words to exclude buildings and houses, or to restrict the meaning." Under the common law, the Crown is the "absolute owner" of land. A person may hold an "estate" in land, meaning an interest that is less than absolute ownership. Fee simple is the largest estate known at law. Fee simple may be of potentially infinite duration. A life estate is an interest in property that is for the duration of a lifetime. Life estates are less common now than in the past. British Columbia has a Torrens land title system which operates on the principle of "title by registration" and relies on certainty of title. Under the Torrens system, certainty of title is ensured through the principle of “indefeasible title” (and the indefeasibility of a registered instrument). The Land Title and Survey Authority (LTSA) was incorporated in 2005 by the Land Title and Survey Authority Act to manage, operate and maintain the land title and survey systems of British Columbia and to facilitate the execution of Crown grants. The Land Title Register is BC's official legal register of private land title ownership and legal charges filed against an owner's interest in land. Because of the conclusive nature of the Land Title Registry, title is assured and should an error be made in a title, the LTSA will compensate individuals who suffer a loss as a result.

25

NWPTA, Part V.C.2 26

NWPTA Article 14.4. 27

Community Charter, section 8 (10); Local Government Act, section 176 (1)

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Section 20 of the Land Title Act provides that, except as against the person making it, an instrument purporting to transfer, charge, deal with or affect land or an estate or interest in land does not operate to pass an estate or interest, either at law or in equity, in the land unless the instrument is registered in compliance with the Land Title Act.

B. Leases and Licences A lease is a demise of land under which a landlord grants exclusive possession of land to a tenant. During the term of the lease, the landlord’s right to actual possession of the land is suspended. Section 73 of the Land Title Act prohibits the subdivision of land for the purpose of transferring it or leasing it for a term exceeding 3 years without obtaining subdivision approval under Part 7 of the Land Title Act.28 Without such subdivision approval, a lease exceeding 3 years cannot be registered in the Land Title Register. Pursuant to section 20 of the Land Title Act, an unregistered lease does not grant the lessee a legal or equitable interest in land, which means a lessee is precluded from enforcing its rights against the land. Failure to register a lease with a term of more than 3 years or other charge against title does not preclude the existence and enforcement of personal contractual rights between the parties to the lease, mortgage or other form of agreement (Such personal rights are often referred to as offering in personam rights or remedies. "In rem" refers to rights or remedies in land). A “licence” is not an interest in land. While a licence agreement will be enforceable between the parties to the agreement, the licence will not run with the land over which the licence is held which means that if the land is sold or otherwise transferred, the licence will not be enforceable against the successors in title.

C. Easements and Statutory Rights of Way

At common law, an easement is an interest in land that grants rights with respect to the use of land or rights to restrict the use of land. An easement does not provide rights of exclusive possession. The interest granted under the easement must benefit another parcel. The land encumbered by the easement is referred to as the servient tenement and the land that benefits from the easement is referred to as the dominant tenement. Although it is not necessary that the dominant tenement and servient tenement be adjacent to one another, there must be reasonable proximity between the dominant and servient lands.

28 This requirement does not apply to a subdivision for the purpose of leasing a building or part of a building.

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A statutory right of way is a right in the nature of an easement and is created by section 218 of the Land Title Act, which provides that the common law requirement that there be a dominant tenement and servient tenement does not apply to statutory rights of way. A person who executes an instrument in which a statutory right of way is created is not liable for a breach of the instrument occurring after the person has ceased to be the owner of the land. Statutory rights of way ("SRWs") may only be held by those persons specified in section 218 of the Land Title Act, which include municipalities, regional districts, local trust committees under the Islands Trust Act and local improvement districts for any purpose necessary for the operation and maintenance of their undertaking, including a right to flood. A person who grants a statutory right of way is not liable for a breach of a covenant in the SRW agreement occurring after the person has ceased to be the owner of the land. The SRW agreement should include a recital or statement in the application to register the SRW to the effect that the SRW "is necessary for the operation and maintenance of the grantee's undertaking."

D. Restrictive Covenants And Statutory Covenants

A restrictive covenant is a right to limit the uses that another person may make of their lands. Restrictive covenants are similar to easements; they run with the land, bind successors in title and require that there be a servient tenement and a dominant tenement that is benefited or accommodated by the covenant. Unlike an easement, a restrictive covenant cannot confer a positive right such as a right of way.

The statutory requirements to register a restrictive covenant are set out in section 221 of the Land Title Act. Generally, a restrictive covenant is not registrable unless: (1) the obligation that the covenant purports to create is negative or restrictive; (2) the land to which the benefit of the covenant is annexed and the land subject to the burden of the covenant are both satisfactorily described in the instrument purporting to create the covenant; and (3) the titles to the benefited and burdened land are registered. In the past, covenants were used to discriminate against certain persons. Per section 222 of the Land Title Act, covenants that discriminate on the basis of sex, creed, colour, nationality, ancestry or place of origin of a person are void.

Section 219 of the Land Title Act, s. 219, provides for the registration of covenants in favour of certain bodies, including municipalities, regional districts, local trust committees under the Islands Trust Act and local improvement districts (“covenantees”) against lands owned by a "covenantor".

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Unlike common law restrictive covenants, covenants registered pursuant to section 219 of the Land Title Act may be positive or negative in nature and they are enforceable against the covenantor and its successors in title even if the covenant is not annexed to land owned by the covenantee. However, statutory covenants may be taken for limited purposes. For example, under subsection 219(4) of the Land Title Act a statutory covenant may contain a provision that land is to be “protected, preserved, conserved, maintained, enhanced, restored or kept in its natural or existing state”. Land development agreements, flood plan covenants and restrictions on building or other uses in favour of local governments are common examples of section 219 covenants. The Community Charter provides that if a building bylaw is in place and a building inspector considers that construction would be on land that is subject to or is likely to be subject to flooding, mud flows, debris flows, debris torrents, erosion, land slip, rockfalls, subsidence or avalanche, the building inspector may require the owner of land to provide the building inspector with a report certified by a qualified professional. If a qualified professional certifies that the land may be used safely for the use intended if the land is used in accordance with the conditions specified in the professional's report, then the building inspector may issue a building permit, but only if:

(a) the owner of the land covenants with the municipality to use the land only in the manner certified by the qualified professional as enabling the safe use of the land for the use intended, the owner

(b) the covenant contains conditions respecting reimbursement by the owner for any expenses that may be incurred by the municipality as a result of a breach of a covenant under paragraph (a); and

(c) the covenant is registered under section 219 of the Land Title Act.

VII. CONCLUSIONS

As set out, above, this paper is not intended to be a dissertation on the law of contracts, but rather a general overview of the area with a focus on the kinds of contracts and types of issues that often arise with local governments. Local governments should negotiate contracts using sound legal principles to ensure that the resulting agreements are valid and enforceable and that they represent the bargains struck including, but not limited to, the allocation of risk in the event something goes wrong. With a view to managing legal risk, the use of considered template agreements should be encouraged and should only reluctantly be varied. Local governments should review their contacting practices and policies on a routine basis because contracting is an ordinary interaction and a complex area of law.