Lexpert Magazine

LEXPERT MAGAZINE | NOVEMBER/DECEMBER 2017 13 In this case, that intention "was that they would be bound for definite, successive five-year periods and that the member pharmacists would have full discretion to decide to renew or not to renew the con- tract," Justices Richard Wagner and Clé- ment Gascon wrote for the majority. "e court in this case clarified the is- sue," says Éric Préfontaine, a partner in Osler, Hoskin & Harcourt LLP in Mon- tréal. An agreement that may be perpetu- ated forever, and therefore creates an obli- gation forever, does not contravene public order under Québec law, he says of the SCC's decision. In 1998, the respondent companies of Ges- tion Gosselin and Bérubé Inc., or "member pharmacists," decided to affiliate their phar- macies with the Uniprix banner. Uniprix is a Québec pharmacy chain based in Mon- tréal. e resulting contract of affiliation contained a clause to the effect that it would be renewed automatically un- less the member pharmacists gave notice to the con- trary. e contract was subsequently twice renewed au- tomatically, until in 2012 Uniprix notified the member phar- macists that their contractual relationship would terminate as of January 2013. e member pharmacists argued that the Perpetual contracts valid in Québec Supreme Court of Canada upholds appellate court ruling in disputed contract of affiliation BY ELIZABETH RAYMER contract could only be cancelled by them. Uniprix countered that that interpretation could have the effect of binding the parties in perpetuity, which would be contrary to public order, and that the contract should be considered to be for an indeterminate term, thus allowing it to be resiliated at any time on reasonable notice. e majority of the Québec Court of Ap- peal affirmed the Su- perior Court of Qué- bec's judgment, find- ing that the Civil Code of Québec does not prohibit contracts that could be perpetual. Indeed, the SCC noted the validity of perpetual contracts in Québec residen- tial leases. "Normally a [residential] lease is for a one-year period," says Préfontaine. "But the tenant under Québec law has a right to remain in his premises. He's entitled to renew the lease every year provided he's not in default … So, even if you have an agreement that's of fixed duration, the fact that one party has the right to renew … could result in perpetual obligations under civil law." In forming its decision, the SCC stressed the importance of the clear wording of the Uniprix contract and the common inten- tion of the parties. "In this case, the parties agreed on a clear term of five years together with an equally clear renewal mechanism that would enable them to pursue their busi- ness relationship for fixed five-year peri- ods," the court found. "A conclusion that the contract is one for an indeterminate term would fly in the face of logic and the clearly expressed intention of the parties." THE SUPREME COURT of Canada has affirmed the validity of perpetual contracts in Québec law in a six-three decision hand- ed down in July. In Uniprix inc. v. Gestion Gosselin et Bérubé inc., 2017 SCC 43, the majority of the court found that a unilateral renewal option in a contract of affiliation was con- sistent with other provisions of the con- tract, with the circumstances surrounding its signature and its object, and with the parties' conduct in applying it. Characterizing and interpreting a con- tract are two distinct actions, the SCC not- ed, and "in Québec civil law it is the classifi- cation of the contract — based on the rules that apply to it, the conditions that apply to its formation, its object and how it is per- formed — that makes it possible to define the nature of the contract and thereby de- termine how it should be characterized." André Joli-Cœur, a partner in Joli-Cœur Lacasse , s.e.n.c.r.l. in Québec, says there have not been many decisions recently on the characterization of contracts, which "depends on the intention of the parties when they wrote the contract." When a contract is worded in clear and unambigu- ous language, the SCC found in the Uni- prix decision, "it doesn't need interpreta- tion," says Joli-Cœur. But, the SCC found, where the parties' positions are incompatible despite clear contractual wording, as in Uniprix, the in- terpretation exercise is important "in order to identify the parties' common intention." ANDRÉ JOLI-COEUR > JOLI-COEUR LACASSE, S.E.N.C.R.L. ÉRIC PRÉFONTAINE > OSLER, HOSKIN & HARCOURT LLP ON THE CASE "THE COURT IN THIS CASE CLARIFIED THE ISSUE: EVEN IF … THERE IS A POSSIBILITY THAT AN AGREEMENT WILL BE PERPETUATED FOREVER, AND CREATES AN OBLIGATION FOREVER, THAT DOES NOT GO AGAINST PUBLIC ORDER UNDER QUÉBEC LAW." > ÉRIC PRÉFONTAINE, OSLER, HOSKIN & HARCOURT LLP

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