A recent article discussing the Supreme Court of British Columbia’s decision in Sui v. HungryPanda Tech Ltd. highlights a key legal principle: fresh consideration is essential when modifying an employment contract, especially if changes are not in the employee’s favour.
Case Overview
In April 2021, Hungry Panda offered the position of “General Manager of Canada” to X.S. by email. After a series of negotiations on terms of employment, X.S> accepted HungryPanda’s offer. The following day, an official employment agreement was sent to him, which included a termination clause that had not previously been discussed. X.S. signed the agreement that included the termination clause. Eighteen months later, X.S. was terminated without just cause and argued that the termination clause was unenforceable because it was added without offering any new benefits or “fresh consideration” to the existing agreement formed via email.
Court’s Ruling
A fundamental principle of contract law is that there can only be a binding and enforceable contract if each party receives consideration for entering into the contract. Where one party wishes to modify a contract, they must provide “fresh” consideration, meaning some new benefit, to the other party in order for the modifications to the contract to be enforceable.
The court sided with X.S., ruling that the email exchange constituted a binding contract and that the termination clause added later was invalid due to a lack of fresh consideration. Although HungryPanda claimed that additional benefits such as health insurance and paid time off provided fresh consideration, the court found no direct link between these benefits and the new agreement.
Additionally, the court found ambiguity in the termination clause, which incorrectly referenced Quebec’s employment standards law rather than B.C.’s Employment Standards Act (ESA). Despite this, the court resolved the ambiguity in favour of applying B.C.’s ESA.
Key Takeaways for Employers:
Fresh Consideration Required: When modifying an existing employment contract, employers must provide a new, tangible benefit to the employee to make the changes enforceable.
Clear Drafting of Termination Clauses: Ambiguities or incorrect legal references in termination clauses can render them unenforceable, exposing employers to greater liability in accordance with common law notice periods.
Notice Periods: In this case, the court awarded X.S. six months’ notice, taking into account his senior management role and non-competition clause.
This case reinforces the importance of employers handling contract modifications carefully and ensuring that employment agreements are clear and legally sound. At Kent Employment Law, we provide expert guidance on employment contract matters, helping employees and employers navigate complex legal issues to ensure compliance and protection of their rights.
If you have questions about your employment agreement or need assistance with a contract modification, call us today at (604) 266-7006 for a consultation.
For more information on the case, see Sui v HungryPanda Tech Ltd., 2024 BCSC 1856 (CanLII).
