Looking to read more about commercial contracts under Quebec laws?
Perhaps you are a curious soul looking to better understand commercial contracts in general?
No matter the reason, we have what you need!
In this article, we will look at commercial contracts under Quebec laws. We will look at what they are, how they are negotiated, the type of commercial contracts and their formation under Quebec laws.
We have divided this article into the following sections so you can navigate to the relevant section:
- What is a commercial contract?
- How commercial contracts are negotiated
- Type of commercial contracts
- Formation of a commercial contract under Quebec laws
- Laws governing commercial contracts
- Takeaways
Let’s get started…
What is a commercial contract?
Commercial contracts are both common and essential for many economic processes in the world.
What do commercial contracts mean under Quebec laws?
The Quebec law does not specifically define a commercial contract as this is a relatively broad term.
Commercial contracts broadly describe a contract that parties and businesses will enter into in their ongoing business and commercial activities or perhaps on a one-time basis.
A commercial contract can relate to anything commercial in nature really.
It can be buying a product or a service, hiring, renting, lending, borrowing or contract required by a business to successfully conduct its commercial activities.
A commercial contract is fundamentally a contract describing the commercial activities that two parties or more wish to agree upon vis-à-vis one another.
The parties will negotiate the terms and conditions of their commercial contract to satisfy their commercial needs and to protect themselves legally.
Just like any other contract, commercial contracts are legally binding between the signing parties.
The commercial contract will serve as a foundational document to the parties where they’ve outlined their key considerations and requirements.
Parties to a commercial contract typically enter into these agreements they each see value.
There are many types of commercial contracts out there, let’s see what are some of them.
In some cases, there will be specific laws that can apply to a commercial contract.
For example, if you are selling goods to consumers, you are entering into a commercial contract for the sale of your goods but under Quebec laws, the Consumer Protection Act will also apply.
Under the Consumer Protection Act, the merchant will have additional statutory obligations to respect to ensure that the commercial contract for the sale of a good, or a consumer contract, respects the letter and spirit of the law.
How commercial contracts are negotiated
Typically, commercial contracts are duly negotiated between the business parties.
Considering the parties may need to exchange confidential or sensitive information in order to agree on the terms of a commercial contract, often the parties will sign a non-disclosure agreement to protect the confidentiality of the information exchanged.
Once the non-disclosure agreement is signed, the business parties will share all the necessary material and information needed to reach an agreement from a commercial perspective.
Once an understanding is achieved in principle, the parties will then exchange a draft contract to translate their commercial discussions into a legally binding commercial contract.
Most companies will have an agreement template that they’ll use to kick-start the process.
Depending on the complexity of the commercial contracts, the business parties may choose to handle the contract redlining and modifications themselves.
Some companies may have an internal team of legal advisors to help with the signing of a commercial contract.
Other companies will have an external counsel handle it for them depending on the complexity of the contract and their adequate understanding of the laws applicable to the contract.
Once all parties agree on the wording and language of the contract, the agreement will then be executed by each party.
Type of commercial contracts
There are countless types and flavours of commercial contracts.
From a legal point of view, commercial contracts can be formed either verbally or in writing.
The main difference between the two is that you will have a harder time defining with precision the terms of a verbal contract compared to a written contract.
No matter how the commercial contracts are formed, let’s identify a few types of commercial contracts:
- Distribution agreements
- Manufacturing agreements
- Fabrication agreements
- Research and development agreements
- Development agreements
- Services agreements
- Consulting agreements
- Product purchase
- Sale agreements
- Rental agreements
- Partnership agreements
- Joint venture agreements
- Franchise agreements
- Service level agreements
- Non-disclosure agreements
- Performance contracts
- Letters of intent
This list is not exhaustive and can go on and on!
Any type of contract essential for a business to successfully conduct its business can be considered a commercial contract.
Even a contract signed for a one-time transaction can be a commercial contract.
As the name of the contract implies, it has a “commercial” value for a party.
A company enters into a type of commercial contract in order to seek a benefit, an advantage or get value in exchange for something they have that they offer in return.
Formation of a commercial contract under Quebec laws
How are commercial contracts formed under Quebec laws?
A commercial contract will follow the same rules for its formation as other types of contracts.
The primary legislation applicable is the Civil Code of Quebec governing all aspects of contract formation, validity and recourse.
Under Quebec’s contract laws, the essential components of contract formation is:
- It must be between two or more persons
- Where the persons have capacity to enter into a contract
- There must be an exchange of consent, there must be an agreement of wills
The commercial contract is therefore formed at the moment where this is an agreement of wills.
The agreement of wills can be divided into an offer and acceptance.
In this article, we will discuss the formation of a commercial contract between two business entities or where both parties are entering the contract for commercial reasons.
We assume that the contract is not subject to any other statutory regime other than the Civil Code of Quebec.
For a commercial contract to be validly formed between business entities, we can describe the process as follows:
- Both business entities must have the capacity to sign
- The parties must agree on the object of the commercial contract
- There must be a clear offer made by one party
- There must be a clear acceptance demonstrated by the other party, typically both parties demonstrate their acceptance by executing the contract
- The object of the contract must not be against the public order
When the above conditions are satisfied, you can have a valid commercial contract.
We are painting a general picture of the formation of commercial contracts here.
In the event of relevant laws, international conventions or other statutory grounds impose specific requirements to your commercial contracts, you must ensure you abide by the applicable laws.
For instance, you can have legislation like the Uniform Commercial Code (UCC) that can apply.
Perhaps the United Nations Convention on Contracts for The International Sale of Goods could apply as well.
You will need to monitor the statutory basis on which your commercial contract is founded upon so you can respect the requirements for its valid formation.
Laws governing commercial contracts
When two business entities in the same jurisdiction do business with one another, by default, the law governing that contract will typically be the laws of where the contract was formed.
For instance, in the Civil Code of Quebec, in the absence of any clause on the subject, the contract is considered formed at the location where the accepting party accepted the contract.
In today’s economy, commercial transactions go beyond a pure local arrangement.
We can deal with a company nationally or internationally.
You can have commercial transactions involving several parties each in different jurisdictions.
As laws vary between different jurisdictions, businesses could be faced with situations where the laws of many jurisdictions can simultaneously apply to their contract and even impose conflicting requirements.
A contract can be enforceable in one jurisdiction while unenforceable in another.
That’s where we need to have a mechanism to define the law applicable to the contract.
In most cases, commercial contracts will have a choice of law clause where the parties mutually agree to interpret the terms of their contract on the basis of the laws of a jurisdiction they’ve selected.
In the event of a dispute or legal challenge, the parties will have a clear understanding of the laws applicable to their contract.
Takeaways
Thousands, if not millions, of commercial contracts are signed every day around the world.
Commercial contracts are the pillars of all economic activity.
There are commercial contracts we sign routinely and those that we may sign once in a life-time.
In our lives, we will come across a commercial contract and it can be useful to have a baseline understanding of it.
We’ve looked at commercial contracts under Quebec laws.
Depending on your jurisdiction, the legal framework applicable to a commercial contract may be different so you should be mindful of that.
Should you need assistance with any commercial contract negotiation, review or interpretation, our contract lawyers are here to support you.
We hope this article was useful to you!
