Executive Summary: Key Legal and Evidentiary Issues

• Characterization of the parties’ arrangement as a consignment agreement rather than a sale of goods, based on contemporaneous emails and draft contract terms.
• Determination that World Alive S.L. repudiated the consignment agreement by suing for the price of goods instead of honoring the agreed distribution structure.
• Proof, on a balance of probabilities, of Family Games America FGA Inc.’s lost profits over a three-year period, measured by the agreed $250,000 in annual product sales.
• Rejection of additional expense claims (trade fairs, warehousing, catalogues, marketing, etc.) to prevent double recovery where those costs were the means of generating the lost revenue.
• Failure of the claim for reputational damage due to absence of concrete evidence of lost business relationships or identified counterparties refusing to deal with FGA.
• Limited award for “troubles and inconveniences” tied to time spent managing fallout with retailers and representatives when the Aqua Dragon products could not be supplied.

Background and parties

World Alive S.L. (WA) is a Spanish manufacturer that imports, exports and distributes toys and gift items. Family Games America FGA Inc. (FGA) is a Canadian company active in the toy and game industry, including distribution of third-party products through its established network. The dispute arises from a commercial relationship formed in 2019 for the distribution of WA’s products, particularly the Aqua Dragon line, an aquarium-style toy in which live crustaceans develop when a special powder is added.

Formation of the consignment agreement

The parties first met at a toy fair in Nuremberg in early 2019, where WA expressed interest in FGA’s North American distribution network, and FGA showed interest in WA’s products, especially Aqua Dragon. They agreed that FGA would represent WA at upcoming toy fairs in New York and Las Vegas, prompting FGA to modify its catalogue to add WA’s products and to reserve two stands at those fairs. WA transferred inventory to FGA’s leased warehouse in anticipation of future distribution.
A core legal issue was the nature of this arrangement: WA’s initial position in its own action was that it had sold goods to FGA and was owed the price. FGA countered that the products were held on consignment so that WA would be paid only as sales were made. The court examined both testimonial and documentary evidence, including a key email of 2 February 2019 and a draft written agreement that followed, to determine the parties’ true consensus. It concluded that the parties had reached a principled agreement and then agreed on a written document to formalize it, and that this agreement was one of consignment, not outright sale. The court found that there had been a valid contract, with a clear object and exchange of consent under article 1386 of the Civil Code of Québec.

Breakdown of the relationship and litigation

Despite the earlier consensus on consignment, WA later appeared to distance itself from the arrangement without ever providing FGA with a clear explanation. In May 2021, WA commenced proceedings in the Court of Québec claiming $60,826.37 from FGA for allegedly sold and delivered products that remained unpaid. By framing its claim as one for the sale price, WA effectively signaled that it no longer intended to perform the consignment agreement.
At the same time, WA’s own action ultimately did not proceed on the merits. WA failed to appoint a new lawyer, prompting FGA to seek dismissal. On 21 December 2023, the court granted FGA’s motion to dismiss WA’s action and ordered that FGA’s cross-demand (demande reconventionnelle) be inscribed by default. The Superior Court judgment now under discussion concerns only FGA’s amended cross-demand, in which FGA claimed a total of $473,582.63 in damages after WA’s repudiation of the agreement.
At the hearing in March 2026, FGA withdrew certain paragraphs and some conclusions of its amended cross-demand, narrowing the claims before the court. Four witnesses testified for FGA: a shareholder/director, two sales representatives, and an external consultant-accountant, providing evidence on the nature of the agreement, the business plan and expected sales, and the financial impact of WA’s non-performance. WA did not appear at the hearing, and no representative of WA testified.

Evidence on damages and court’s analysis

FGA’s damages claim had several components: representation at toy fairs, transport and warehousing, catalogue modifications, integration of price lists, shipment of samples, marketing efforts, sales meetings, loss of revenue, reputational damage, and “troubles and inconveniences.” The largest element was loss of revenue of $403,830.05, supported by documentary and testimonial evidence and tied to the original understanding that FGA would sell roughly $250,000 of WA’s products per year for three years. The court accepted that, because WA failed to perform the consignment agreement, FGA was deprived of this revenue stream and met its burden of proof on lost profits.
However, the court carefully examined whether FGA could also recover the various business expenses it had incurred (fairs, catalogues, warehousing, and related costs), which totaled $62,252.58. FGA’s director candidly testified that if the consignment arrangement had been honored and FGA had earned the $403,830.05 in revenue, it would never have sought reimbursement of those expenses from WA. On that basis, the court held that awarding both the lost revenue and those expenses would amount to double compensation: in a functioning relationship, FGA would have borne those costs itself in order to generate the profits. Accordingly, the court denied this portion of the claim.
As to reputational damage, FGA claimed $5,000 on the theory that retailers lose confidence when they cannot obtain a product they saw at a trade fair and for which they had reserved budget and shelf space. Two representatives testified that they received orders for the Aqua Dragon product that could not be filled once WA failed to perform. The court acknowledged this general business reality but emphasized the need for concrete proof of actual harm under article 1457 C.c.Q. No specific third parties or companies were identified as having refused to deal with FGA because of the failed WA distribution arrangement, and the very witnesses who testified continued to do business with FGA. The claim for reputational damage was therefore rejected for lack of proof.
On the other hand, the court accepted that FGA had suffered non-pecuniary “troubles and inconveniences.” FGA’s representative had to spend five to six hours per week over the course of a year explaining to representatives and retailers why he could not distribute WA’s products, including Aqua Dragon, in order to preserve those business relationships. The court found that this effort and disruption met the evidentiary threshold and awarded $2,500 for this head of damage.
Legally, the court characterized WA’s filing of its action in May 2021 as a clear manifestation of its intention not to perform the consignment agreement, which triggered FGA’s right to claim damages and interest. Relying on article 1597, paragraph 2 of the Civil Code of Québec, the court held that interest at the legal rate and the additional indemnity would run from 19 May 2021, the date WA instituted its claim.

Ruling and outcome

The Superior Court partially granted FGA’s amended cross-demand. It upheld FGA’s claim for loss of revenue in the amount of $403,830.05 and its claim of $2,500 for troubles and inconveniences, for a total principal award of $406,330.05. The remaining claims for business expenses and reputational damage were dismissed to avoid double recovery and for lack of evidence of specific reputational harm. As the successful party, Family Games America FGA Inc. obtained judgment condemning World Alive S.L. to pay it $406,330.05, together with interest at the legal rate and the additional indemnity under article 1619 C.c.Q. from 19 May 2021, plus court costs, although the precise amounts of interest and costs are not quantified in the decision itself.