Notional Severance, Usurious Contracts, and Two Comments on the Supreme Court's Decision in the New Solutions Case

Canadian Business Law Journal, Vol. 42, 2005

2 Pages Posted: 4 Jul 2008

Date Written: January 1, 2005

Abstract

In Transport North American Express Inc. v. New Solutions Financial Corp. the Supreme Court of Canada held, in a case where the maximum interest rate provisions of the Criminal Code had been accidentally infringed, that the lender was entitled to recover the maximum legal rate of interest. Arbour J., for the majority of the court, rejected the view of the majority of the Ontario Court of Appeal, called the "blue pencil" test, that severance was only permissible as an "all or nothing" excision of a contractual clause that could be identified in distinct and separate words.

The conclusion reached by the Supreme Court in New Solutions has the merit of treating like cases alike, of avoiding chance windfalls to the borrower, and of increasing predictability.

Suggested Citation

Waddams, Stephen Michael, Notional Severance, Usurious Contracts, and Two Comments on the Supreme Court's Decision in the New Solutions Case (January 1, 2005). Canadian Business Law Journal, Vol. 42, 2005, Available at SSRN: https://ssrn.com/abstract=1154595

Stephen Michael Waddams (Contact Author)

University of Toronto - Faculty of Law ( email )

78 and 84 Queen's Park
Toronto, Ontario M5S 2C5
Canada

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