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Quebec Contract Laws (Doing Business In Quebec)

Want to learn more about Quebec contract law?

Looking to sign a contract in Quebec or subject to Quebec laws and you want to better understand what you are getting into?

Perhaps you are just curious!

No matter what, we’ve got you covered.

In this article, we go over the Quebec contract law so you know what is a contract, how it is formed, you understand the warranties, representations, covenants, governing law and forum, termination of contract, breach of contract, remedies and more.

We have divided this article into the following sections for your ease of navigation:

Let’s get started…

What is a contract

A contract is an agreement between two private parties with respect to either mutual or unilateral obligations to be rendered by the parties.

A contract can be either written or verbal provided the contract respected its formation conditions.

Typically, a contract is formed when there is an offer and acceptance mutually agreed upon.

The Civil Code of Quebec legally defines a contract to be “an agreement of wills by which one or several persons obligate themselves to one or several other persons to perform a prestation”.

In essence, a contract is an agreement by two or more persons or entities to do something in exchange for something else.

Contract formation 

Under Quebec laws, a contract is formed by the sole exchange of consents between persons having the capacity to contract.

The contract must also have a cause and an object.

Exchange of consents

The exchange of consents is accomplished by the express or tacit manifestation of the will of a person to accept and offer to contract made to him by another person.

This means that for an exchange of consents to take place, there must be an offer and acceptance, either expressly or implicitly.

A contract is formed at the moment and place where one party accepts the offer made by the other.

How does the offer and acceptance work?

Offer and acceptance

An offer is a proposal containing all the essential elements of a contract submitted by one party to another.

Typically, the offer is made by the person who defines the essential elements of the contract and initiates the proposal.

When an offer is made and the other party accepts the offer, that’s the precise moment that a contract is formed.

An offer can be made with conditions or with a term past which it will expire.

If the offer is made with a term, the acceptance must take place within the term.

If the offer is made with a condition, the offer will become an unconditional offer to contract when the conditions are met.

For a contract to be formed, the acceptance must also correspond to the acceptance of what was offered.

If a party makes an offer and the other one accepts something different, then a contract is not legally formed.

Defects of consent

There are instances where a contract may be formed in appearance but one party did not really consent to it or the consent was not valid.

A consent may not be valid if a person contracted based on an induced error, fear or lesion.

If someone contracted but induced by the fraudulent behaviour of the other contracting party, then the law will not recognize the consent as validly given and therefore the contract will not be validly formed.

Consent is not valid if it was induced by fear.

If you signed a contract as the other party was threatening to hurt you or a family member, then that contract will evidently not be valid.

Lesion is when a party exploits the other when there is a serious disproportion between the obligation of one party relative to the other.

Lesion is will result in the nullity of the contract typically with minors or adults who are unable to properly give consent.

Capacity to contract

The capacity to contract is the legal ability to contract.

In Quebec, you can contact when you are of legal age of 18 and over.

In some cases, minors can contract as well particularly when it’s related to the exercise of their profession.

Cause of contracts

Under Quebec contract laws, a contract must have a cause.

The cause of a contract is the reason why this contract was entered into in the first place.

The cause does not need to be specifically be written in the contract for the contract to be valid.

The cause of the contract must also be legal.

A contract violating the law or going against the public order will not be valid.

Object of contracts

The object of a contract is the obligations the parties negotiated at the moment the contract was created.

The object of the contract must also be for legal purposes just like the cause.

The obligations executed by the parties must not be illegal or violate the public order.

Form of contracts

In most cases, contracts can be formed verbally or in writing without any other formalities.

However, for some contracts to be validly formed, the law will impose specific formalities to be respected.

A promise enter into a contract will not have any formalities to observe under Quebec contract laws but the final contract must observe the formalities required by law.

Warranties, representations and covenants

In most commercial contracts, you will see warranties and representations or covenants made by the parties to the contract.

Representations 

A representation is a statement of facts, arguments or allegations relating to the past up to the signing of the contract.

Representations are factual statements you present to the other party inducing them to sign a contract with you.

So representations cover the past and the present.

Warranties

A warranty will cover the future from the moment you sign the contract.

A warranty is an assurance you will give the other contracting party that there will be no problems with the product or they are buying it “as-is”.

Depending on the extent of the warranty you offer, you are holding yourself accountable or not for future incidents. 

A warranty is therefore a statement certifying that certain facts or contract subjects will hold true and should it not be the case, the other party is protected from a loss resulting from that.

Covenants

Covenants are promises made by the parties to do something or not in the future.

Covenants will only look towards the future.

It’s a promise made by one party or both parties in how they will deal with one another in the future.

Choice of law and forum

Parties to a contract can mutually agree on the choice of law applicable to their contract and the forum which is where potential disputes may be heard.

Choice of law

A choice of law clause is a clause specifically outlining the law applicable to the contract. 

Under Quebec contract law, a choice of law clause is valid in a commercial context unless it goes against the law or prohibited by the public order.

When the contracting parties are in different jurisdictions, it is good practice to include a governing law clause so there is better clarity as to the applicable law. 

In the absence of a choice of law clause, based on Quebec contract law, the law applicable to the contract is the one that may be inferred with certainty from the terms of the contract.

If the parties did not designate an applicable law to the contract and the law of the jurisdiction inferred invalidates the contract, Quebec courts may apply the law of the jurisdiction having a close connection to the contract in regards to its nature and circumstances.

Depending on the nature of the contract signed, the choice of law clause may not have an impact on the application of the local laws.

This is the case in regard to employment contracts for instance where the choice of law clause cannot deprive an employee of the legal protections afforded by the Quebec local laws.

Choice of forum

The choice of forum is where the parties intend to have their case heard in the event of a dispute.

You do not necessarily need to submit the dispute to the courts of the jurisdiction you chose under the choice of law clause.

You can have a valid commercial choice of forum clause submitting disputes to the Courts of Quebec while the governing law was that of Ontario.

You can also define in your choice of forum clause that the forum you choose will have exclusive or non-exclusive jurisdiction to hear the case.

Exclusive jurisdiction means that a legal action can only be commenced before the specific courts or within a specific jurisdiction while a non-exclusive jurisdiction allows the parties to be heard by different courts in the selected forum.

Termination of contract

There are typically five ways that a contract can be terminated.

Termination due to impossibility to act

A contract can be terminated if one party is in the impossibility to execute his or her obligations.

The impossibility is caused by factors outside of the control of the parties such as serious illness or death.

Termination for cause

A contract can be terminated for breach of contract.

This is when one party does not respect the terms and conditions of the contract allowing the non-breaching party to terminate if the breach is material.

Termination for convenience

Termination can also be upon written notice prior to the term of the contract.

In contractual jargon, we refer to this as a termination for convenience.

A party has the right to terminate the contract for any reason or no reason whatsoever by giving the other party a prior notice this effect.

Rescission of the contract

A contract can be terminated for rescission due to the misrepresentation, fraud or illegal acts of the other party.

This is a type of contract where the formation conditions were not valid or the consent of one party was extracted by misrepresentation, error, fear or lesion.

Completion of the contract

Finally, a contract may be terminated simply because each party has completed the rendering of its obligation and so the contractual obligations have been fully performed.

Breach of contract

A breach of contract is when a party does not respect the terms and conditions set forth in their contract.

One party was supposed to do something and ended up not doing it or did it very poorly in such a way that the other party suffered damages or injuries.

A breach of contract is the legal ground for the non-breaching party to sue the breaching party.

For a breach of contract claim to be filed in court, you must prove that you had a valid contract, a party breached the terms of the contract, you suffered damages and the breach is material.

Under Quebec contract law, you are required to prove the fault, damage and causal link between the fault and the damage.

This means that if there was a fault but you did not suffer any damages, then you may be able to prove the fault but you will not get any damages awarded by the court.

If you are able to provide the fault and show that the damages resulted directly as a consequence from the fault, the causality, then the court will award you damages.

Be sure to read our article on understanding breach of contract and its consequences under Quebec laws.

Nullity of contract 

If a contract does not respect its formation conditions, then the contract may be invalid.

In other cases, an otherwise seemingly valid contract may be annulled by the courts if its formation was caused by error, fear or lesion.

If a contract is deemed null or annulled, then each party must restore the prestations received from the other party.

If a contract is legally null or can be annulled, then the other party has the option to confirm the contract in clear and express terms.

Remedies for breach of contract

There are many ways you can provide for remedies in the event of a contractual breach.

Some remedies may be contractual while others may be sought through the courts.

Remedies for breach of contract can be to ask for a sum of money or perhaps demand the execution of the performance of the contract.

Here are some remedies possible for breach of contract:

  1. Damages to compensate for the losses suffered
  2. Contractual penalty clause compensating contractual defaults or misses
  3. Liquidated damages where parties have contractually negotiated damages owed in the event of certain violations
  4. Specific performance is to demand the performance of a specific obligation
  5. Injunction is to force the other party to do or not do to something
  6. Liens and securities awarded by one party to another where the security can be exercised in the event of a default
  7. Waiver of rights clause where in the event of a default, the breaching party may lose or waive a legal right to dispute or present evidence
  8. Withholding of payment by one party in the event of the inexecution of the other
  9. Retention of title to a property in the event one party fails to perform the obligations of the contract
  10. Insurance triggers in the event of a default
  11. Legal set-off is the ability to a party to reduce or extinguish his own obligation when the breaching party has a cross-claim against the non-breaching party

Depending on the law applicable to your contract, you may have different remedies to pursue a breach of contract.

To make sure you ask for all the right remedies, you should consult with a contract lawyer experienced in the local laws to give you a sense of what’s possible.

Court interpretation of contracts

When a court is required to interpret a contract under Quebec contract laws, the court will need to search and discover the real intention of the parties as opposed to strictly relying on the literal wording of the contract.

The court will take into account several factors in interpreting a contract such as:

  1. The nature of the contract
  2. The circumstances under which the contract was signed
  3. How the parties to the contract appear to have interpreted their obligations
  4. How the contract was executed between the parties

Based on that, the court will try to define the real intention of the parties at the moment the contract was signed.

The court will also interpret each contractual clause in light of the others so that a consistent meaning can be discovered.

If the contract uses words that may susceptible to two meanings or more, then the court will try to attribute the meaning that is most suitable to the overall terms of the contract.

Also, if the court has doubts about how to interpret a contract, the contract will be interpreted in favour of the person who took on the obligation and against the person who stipulated the obligation.

Takeaways

The essence of Quebec contract law is similar to that of other Canadian provinces and other common law jurisdictions.

There are differences however.

Quebec contract law is based primarily on the Civil Code of Quebec, a comprehensive set of substantive rules applicable to how contracts are formed and performed.

In this article, we’ve looked at the contractual principles derived from the Civil Code of Quebec.

Contractual formation and obligations may also be dictated by other specific statutes such as the Consumer Protection Act.

To ensure you are complying with the Quebec contract laws, you must not only apply the fundamental principles of contract law but also any additional mandatory requirements set out by law.

The contract is one of the most important legal document you will have protecting your rights in the event of a breach of contract.

Make sure you cover all your angles.

If you are considering a commercial contract, we have an overview of commercial contracts under Quebec laws for you.

If you need support and assistance with regards to any type of contract you may need to sign or have already signed, our law firm and contract lawyers are here to provide you with legal assistance.

We hope you enjoyed this article and wish you the best of luck!

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