Executive Summary: Key Legal and Evidentiary Issues

• Characterization of the agreement as a contract of sale rather than a contract for services, determining whether unilateral termination under art. 2125 C.c.Q. was available.
• Determination of contractual fault in cancelling the purchase order solely to obtain a better price from another supplier.
• Assessment of the plaintiff’s proof of lost profits, including the sufficiency of testimonial evidence versus proper financial and accounting documents.
• Application of the burden of proof and the “best evidence” principle to invoices, operating costs, and overhead expenses tied to the gravel pit operations.
• Evaluation of the plaintiff’s statutory duty to mitigate damages under art. 1479 C.c.Q., particularly its refusal of a later, similar supply contract on essentially the same terms.
• Consideration of sanctions for important procedural misconduct under art. 342 C.p.c., and whether late disclosure of documents justified a special award of legal fees.

Factual background

Gestion Normand Lavasseur ltée (Gestion Levasseur) operates a gravel and sand pit under the commercial name Gravière Sablière Levasseur in the region of Notre-Dame-du-Portage in Quebec. Its business includes producing and selling granular materials such as MG-20 and MG-20b. Construction et Pavage Portneuf inc. (Pavage Portneuf) is a paving and construction company that contracts with the Ministère des Transports du Québec (MTQ) for road works on provincial highways. In 2021, Pavage Portneuf was preparing a bid for an MTQ contract to rehabilitate approximately 6.93 kilometres of Autoroute 20 near Notre-Dame-du-Portage. To price its tender, Pavage Portneuf contacted Gestion Levasseur to obtain technical information and a unit price for MG-20 materials. During a discussion on 1 September 2021, Gestion Levasseur quoted a price of $8.65 per metric tonne plus municipal royalties for the required aggregates. The next day, Gestion Levasseur emailed granulometric analyses for MG-20 from its Saint-Modeste pit. These tests showed that the available reserve did not fully meet MTQ specifications for MG-20 for the road structure itself but could qualify as MG-20b suitable for use on the shoulders. After confirming ownership of the pit, availability of the material, and pricing, Pavage Portneuf’s project manager issued a written purchase order on 10 September 2021. The order covered 7,600 metric tonnes of MG-20b at a price of $8.55 per tonne, for a subtotal of $64,980 plus royalties, totalling $69,996, with delivery “around mid-October” over four to five days. Although the price was ten cents lower per tonne than what had been discussed orally, Gestion Levasseur accepted the order as drafted, and the project manager reiterated the intention to take the material in mid-October. Shortly afterwards, Pavage Portneuf requested documentation relating to the operation, including the scale certificate, test reports, and governmental authorization to operate the pit. Gestion Levasseur supplied these documents the following day, including calibration certificates and environmental/operating authorizations.

Cancellation of the order and initial dispute

Within less than two weeks, Pavage Portneuf decided to change supplier. On 21 September 2021, after finding another supplier at a better price, its representative informed Gestion Levasseur that the purchase order for the Notre-Dame-du-Portage project was being cancelled. This cancellation was confirmed in writing by email on 23 September 2021. Gestion Levasseur immediately contested the cancellation and, by return email the same day, asserted that the 10 September 2021 purchase order was the written confirmation of the parties’ mutual consent and therefore formed a binding contract. The company insisted that Pavage Portneuf had to perform its obligations under purchase order PM55438 and warned that it would otherwise assert its rights before the courts. Several months later, on 18 January 2022, Gestion Levasseur, through counsel, sent a formal demand letter claiming $27,360 as loss of profit, calculated at $3.60 per metric tonne of MG-20b that would have been supplied under the cancelled order. The claim was later amended at trial to $23,637.69, but the thrust of the case remained a claim for loss of anticipated profits on a cancelled supply contract. In parallel, Pavage Portneuf obtained another MTQ contract in April 2022 for the rehabilitation of a different section (“mirror contract”) of Autoroute 20 in the same municipality. When preparing that second bid, Pavage Portneuf again approached Gestion Levasseur to purchase MG-20b, this time for approximately 7,250 cubic metres to be supplied in spring 2022. Gestion Levasseur refused to supply at the previously agreed price and instead demanded an extra $1.00 per tonne, so no agreement was reached.

Nature of the contract: sale versus services

At trial, Pavage Portneuf initially sought to argue that no binding contract had been formed but ultimately abandoned that position and acknowledged the existence of a contract between the parties. Its primary legal argument became that the contract was one for services or an enterprise contract, performed over several days, and thus subject to unilateral termination under article 2125 of the Civil Code of Québec (C.c.Q.), provided the client acted in good faith. Gestion Levasseur, in contrast, argued that the arrangement was a contract of sale of a determinate quantity of MG-20b, already in stock, such that Pavage Portneuf could not unilaterally withdraw merely because it had found a cheaper supplier. The court analysed the statutory definitions. A contract of services (or enterprise) under article 2098 C.c.Q. involves an undertaking to perform work or provide a service for a price, whereas a contract of sale under article 1708 C.c.Q. involves the transfer of ownership of a good for a price in money. Article 2103 C.c.Q. clarifies that where the work or service is merely accessory to the value of the goods supplied, the contract is considered to be a sale rather than a service contract. The evidence showed that, in May 2019, Gestion Levasseur had already crushed 20,549 tonnes of MG-20 at a cost of $4.00 per metric tonne, such that, by September 2021, it had ample MG-20b inventory to meet the order for 7,600 tonnes. The granulometric analyses supplied to Pavage Portneuf in early September 2021 had been done prior to the parties’ contractual discussions and reflected existing stock. Pavage Portneuf’s own project manager confirmed that the material was already on hand at the end of the season. Against this backdrop, the court found that only limited loading work remained to be done: rental and operation of a loader for approximately four days, diesel fuel consumption, and the wages of a loader operator. These service elements were comparatively minor when set against the value of the aggregate itself. Applying article 2103 C.c.Q., the court concluded that the purchase order was a contract of sale of granular material rather than a contract for services. As a result, Pavage Portneuf could not rely on article 2125 C.c.Q. to terminate unilaterally without compensation. Instead, the contract was governed by the general rules of obligations, including article 1439 C.c.Q., under which a contract may be resolved or modified only for legal causes or by mutual agreement, and article 1458 C.c.Q., which requires a party to honour its contractual commitments and to compensate the counterparty for any resulting prejudice if it fails to do so. Since Pavage Portneuf cancelled the order simply because it had found a lower-priced supplier and there was no agreed termination, the court found that it breached the contract and was, in principle, liable for any proven loss caused to Gestion Levasseur.

Evidence and calculation of alleged loss of profit

The core of the case then shifted to the amount and proof of the loss of profit that Gestion Levasseur claimed to have suffered. Under article 2803 C.c.Q., the plaintiff bore the burden of proving its loss on a balance of probabilities with admissible and persuasive evidence. Gestion Levasseur’s president testified that, based on the original purchase order, the contract with Pavage Portneuf would have generated revenues of $64,980, calculated on 7,600 metric tonnes at $8.55 per tonne. However, the evidence from the actual MTQ contract carried out by Pavage Portneuf with its replacement supplier indicated that quantities are not fixed at the outset but are adjusted and billed based on the quantities actually used after the works are completed. For the October 2021 work on the shoulders, the real quantity of MG-20b used turned out to be 5,271.8 metric tonnes rather than the 7,600 tonnes estimated. On that basis, the court corrected the potential revenue for Gestion Levasseur to approximately $45,073.89 at $8.55 per tonne, a figure almost $20,000 lower than the revenue theory initially advanced by the plaintiff. Gestion Levasseur also asserted that its net profit on the cancelled contract would have been $23,637.69. Its president itemized a series of costs, including: crushing costs calculated at $4.35 per tonne; fuel expenses of approximately $606; operator wages of $836 for four days at 8.5 hours per day at $22/hour; loader operation costs of $3,800; weighing fees of $760; and an allocation of general overhead at $0.30 per tonne. To support these figures, Gestion Levasseur relied mainly on oral testimony, supplemented late in the process by selected invoices and documents introduced in response to defence objections. Pavage Portneuf objected on the basis of the “best evidence” rule, arguing that proper financial statements, accounting records, and comprehensive cost allocations were required to substantiate a claim of this nature. The court took the objection under advisement but permitted the plaintiff to introduce some additional invoices, including documents relating to crushing operations, fuel purchases, machinery rental rates, municipal royalties, surety bond costs, municipal taxes, insurance premiums, and a payroll slip for an employee. Nonetheless, the court ultimately found these documents unsatisfactory to establish the alleged profit. Several key problems were identified. Some invoices related to materials other than MG-20b (for example, crushing “0 ¾” rather than MG-20b), and a published schedule of machinery rental rates did not prove that those rates had actually been applied in Gestion Levasseur’s accounting records. More fundamentally, Gestion Levasseur filed no financial statements or proper cost allocation schedules showing what portion of its annual overheads—such as royalties, taxes, insurance, bonding, road building and maintenance for the pit, stripping and remediation costs, and financing charges—could be attributed to the specific MTQ order. The court accepted defence evidence that a wider range of costs must be considered when determining profit in a quarry operation, including amortization and ongoing site obligations. Without integrated accounting evidence, the judge held that the plaintiff’s selective invoices and testimony did not convincingly prove the net profit that would have been generated by the cancelled transaction. On this basis, the court concluded that Gestion Levasseur had not met its burden of proving the claimed loss of profit to the required standard and that its figures lacked sufficient probative value.

Duty to mitigate damages

Although the court had already found that Gestion Levasseur failed to prove its loss adequately, it went on to address the question of mitigation under article 1479 C.c.Q. That provision states that a person liable for compensation is not responsible for any aggravation of the prejudice that the victim could have avoided by acting reasonably. The Court of Appeal has summarized this duty as an obligation of means, assessed by reference to a diligent and reasonable person in similar circumstances, applicable in both contractual and extra-contractual settings, and operating to exclude from recoverable damages any avoidable, non-direct, or non-foreseeable loss arising from the victim’s failure to act. In this case, the evidence showed that, as early as 23 September 2021, Pavage Portneuf’s representative indicated to Gestion Levasseur that there would be other contracts in the area. Despite this, Gestion Levasseur was unreceptive. After receiving the January 2022 demand letter for loss of profits, Pavage Portneuf, while preparing a bid for the second MTQ “mirror” contract for another section of the same highway, again approached Gestion Levasseur with an offer to buy a similar quantity of MG-20b—about 7,250 tonnes—for spring 2022 at the same unit price as in September 2021. Gestion Levasseur refused unless Pavage Portneuf agreed to a price increase of $1.00 per tonne, a hike the plaintiff could not justify. No agreement was reached, and Pavage Portneuf sourced elsewhere. The evidence also established that the total quantity of MG-20b actually used under this later MTQ contract was 9,882.8 metric tonnes, significantly higher than the 5,271.8 tonnes actually used under the first contract. The judge observed that, had Gestion Levasseur accepted the second contract at the original price, its revenues would likely have exceeded those it would have obtained from the first, cancelled contract. Even if the court could not precisely quantify the net profit due to the same evidentiary shortcomings, it was “evident” that the plaintiff would not have sustained the loss of profit it was claiming. The court therefore held that Gestion Levasseur breached its duty to mitigate its damages by refusing a commercially reasonable opportunity to sell a comparable quantity of material at the same price to the same customer for a similar project in the same area. This failure to mitigate, combined with the principles articulated by the Court of Appeal, meant that the alleged loss of profit could not be characterized as direct or foreseeable damage attributable to Pavage Portneuf, thereby shielding the defendant from liability even if some loss could have been established.

Alleged procedural misconduct and request for special legal costs

Near the end of the hearing, Pavage Portneuf made an oral request under article 342 of the Code of Civil Procedure (C.p.c.) seeking a special award of its lawyer’s professional fees as compensation for what it described as important procedural misconduct by Gestion Levasseur. The core complaint was that the plaintiff had disclosed key documents relating to its alleged loss of profit very late, despite early and repeated defence requests for such information, including before the case was formally instituted. Article 342 C.p.c. gives judges a discretionary power to sanction significant breaches in the conduct of proceedings by ordering one party to reimburse another, as part of costs, for all or part of its lawyer’s professional fees. This sanction is intended to discourage abuse or improper use of procedural mechanisms and must be interpreted in harmony with articles 19 and 20 C.p.c., which set out fundamental duties of proportionality, good faith, cooperation, and diligence in litigation. The Court of Appeal has emphasized that only “important” breaches warrant such sanctions and has urged moderation to avoid turning routine imperfections or minor delays into billable offences. Applying these principles, the court accepted that Pavage Portneuf had made early efforts to obtain detailed information about the claimed loss of profit and that Gestion Levasseur’s cooperation was less than ideal. Nevertheless, the judge held that the late disclosure and incomplete financial documentation did not rise to the level of an “important” procedural breach within the meaning of article 342 C.p.c. The conduct, while unsatisfactory from a best-practices perspective, did not warrant penalizing Gestion Levasseur by ordering it to pay the defendant’s professional fees beyond ordinary costs. The specific request for a special compensatory award under article 342 C.p.c. was therefore rejected.

Outcome and final orders

In the final analysis, the court found that Pavage Portneuf had indeed breached a valid contract of sale by cancelling the purchase order solely to obtain a better price elsewhere, and thus was, in theory, responsible for any loss directly caused to Gestion Levasseur by that breach. However, Gestion Levasseur failed on the evidentiary front: it did not establish its alleged loss of profit with sufficiently reliable and comprehensive financial proof and further undermined its claim by refusing a later opportunity to sell similar quantities at the same price under the second MTQ contract. This refusal was deemed a failure to mitigate damages, which, combined with the lack of solid proof of loss, blocked any indemnity. The request by Pavage Portneuf for an exceptional award of its professional fees under article 342 C.p.c. was denied, as the judge concluded that the plaintiff’s litigation conduct, while imperfect, did not amount to an important breach of procedural duties. The judgment therefore dismisses Gestion Levasseur’s action in its entirety, with ordinary court costs (“frais de justice”) awarded in favour of the defendant, Construction et Pavage Portneuf inc. No damages, loss-of-profit award, or special legal-fee compensation were granted, and the decision does not state any fixed dollar amount for the costs; the exact monetary value of costs in favour of the successful defendant cannot be determined from the judgment alone.