Ecore International, a manufacturer in Pennsylvania, wanted the services of Downey, an engineer. It was more advantageous for him from a tax perspective not to be an employee, so the parties structured their arrangement using a consulting agreement between a company owned by Downey called CSR Industries (of which Downey was defined as a ‘key person’) and a confidentiality agreement between Ecore and Downey personally. The confidentiality agreement stated that the courts of Pennsylvania had jurisdiction over any disputes. Downey later sued Ecore in Ontario over the assignment of IP rights that had arisen while he worked for Ecore. Ecore moved to stay the Ontario action on the strength of the forum-selection clause (FSC).
The trial judge denied the stay, saying that the confidentiality agreement failed for lack of consideration: it was CSR, not Downey (who was not a party), which received consideration for signing it, so Downey could not be bound by the FSC. The Ontario Court of Appeal thought this was too simplistic: ‘the contours of the exact bargain between the parties may sometimes require consideration of more than one contract’. In reality, the bargain between the parties was contained in both the consulting and confidentiality agreements, which formed a ‘composite whole’, even if not all parties signed both. This interpretation was in accordance with commercial reasonableness (which, incidentally, the court confirmed may be considered even where a contract is not ambiguous). Consideration had therefore moved from Ecore to Downey, and the FSC clause was enforceable against him.
[Link available here].