Executive Summary: Key Legal and Evidentiary Issues

• Characterization of the supply agreement as a contract of sale rather than a contract of enterprise or service under the Civil Code of Québec
• Effect and limits of a unilateral attempt by the contractor to “put on hold” or cancel a confirmed order for custom-made construction materials
• Interpretation and application of the parties’ business convention, particularly the clause barring cancellation of orders more than 24 hours after confirmation
• Availability of specific performance against a commercial buyer that refuses to accept delivery of goods manufactured under a valid sales contract
• Scope and content of the creditor’s duty to mitigate damages, including the obligation to react prudently to a project delay and to attempt resale of undelivered goods
• Assessment of the supplier’s conduct in light of good faith and prudence, and whether its failures break the causal link between the buyer’s default and the supplier’s alleged loss

Facts of the case

Altek Portes et Fenêtres (Altek), a subsidiary of Fenplast inc. (Fenplast), agreed to supply doors, windows and related components (the “Marchandises”) to Groupe JML inc. (JML) for phase 2 of a residential construction project in Lachine known as “Projet Villa.” JML was the general contractor on the project. The parties’ agreement (the “Contrat”) covered the manufacture of the Marchandises according to JML’s dimensions and specifications, as well as delivery to the job site, for a total contract price of $142,016.36, with a desired delivery date of 29 August 2022. On 14 February 2022 Altek internally confirmed the order with an expected shipping date of 30 August 2022, and on 17 February 2022 it placed the corresponding order with its parent Fenplast. The parties were also bound by a broader “Convention d’affaires” dated 30 November 2021 (the “Convention”), with an attached credit opening form. This Convention governed payment terms, warranties, responsibilities, delivery timelines and other general conditions for their commercial relationship. Clause IX of the Convention addressed orders, providing that any order from the buyer received by the seller would be considered valid and subject to the seller’s credit approval, and that orders could not be cancelled more than 24 hours after the seller’s confirmation of the order. JML’s representative, Louis Rochefort, signed each of the eight quotations and expressly approved production of the Marchandises, acknowledging that the offer was subject to credit approval and to the terms of the Convention. The quotations included a section in which the “preneur” accepted the submission and requested that it be put into production for the specified Lachine project, with the requested delivery date.

Project delay and later cancellation

On 15 July 2022, JML’s project manager, Alain Melançon, emailed Altek and sixteen other suppliers to advise that the Projet Villa would be delayed, possibly until spring 2023, indicating that JML would revert with a new date in the following months. In response, Altek’s account manager, Daniel Gagné, warned that Fenplast would certainly charge storage fees, and Melançon confirmed “oui malheureusement.” Gagné then simply replied “ok,” without more. In April 2023, JML learned that the Projet Villa was cancelled because of an insufficient number of buyers and informed Altek of that cancellation. This triggered a further exchange of emails. On 13 April 2023, Gagné told Melançon that all doors and windows for the Lachine project had been produced and asked JML what its “plan de match” was. Melançon immediately asked for the date of fabrication, stating that the project had been put “on pause” by email. On 19 April 2023, JML formally notified all its suppliers that the Projet Villa, involving eight townhouses on the referenced lot, was cancelled. On 12 June 2023, Altek sent a formal demand letter to JML, and JML replied on 10 July 2023 asserting that it was entitled to terminate the Contrat.

Nature of the contract and policy-type terms

The central legal debate concerned how to characterize the parties’ agreement: as a contract of sale, or as a contract of enterprise or service. Under the Civil Code of Québec, a contract of sale (art. 1708 C.c.Q.) involves the seller transferring ownership of a good for a price in money, while a contract of enterprise or service (art. 2098 C.c.Q.) concerns the undertaking to realize a material or intellectual work or to provide a service. The Code also specifies that when the work or service is only accessory to the value of the goods supplied, the relationship is to be treated as a contract of sale (art. 2103 C.c.Q.). In this case, Altek undertook to provide and deliver standard-type doors and windows, cut to the measurements and other specifications given by JML, but not involving goods developed uniquely for that client or requiring complex design work. The additional “service” elements—non-standard paint, separate delivery of screens, a VIP service including protective cardboard, threshold protection, installation of handles and screens, and inspection of openings—were minor in value compared with the total contract price and were treated by the court as incidental. The judge relied on the Court of Appeal’s guidance in Emballages Alpha inc. v. Industries Rocand inc., which emphasizes that customized specifications do not automatically turn a sale into a contract of enterprise; rather, it is the relative value of the goods versus the work that is decisive. Here, the value was in the goods, and the work was accessory. The court therefore qualified the Contrat as a contract of sale.

Another key contractual “policy” term was clause IX of the Convention, which functioned like a standard-form cancellation clause governing all orders between the parties. It provided that every order from the buyer, once received by the seller, would be valid and subject to credit approval, and that orders could not be cancelled more than 24 hours after the seller’s confirmation of the order. JML argued that Altek could not rely on this clause because Altek had not issued a formal confirmation of order to JML. The court rejected that position. Although the internal order confirmation (piece P-3) was primarily an internal Altek document, JML’s representative had signed all quotations and had expressly requested that they be put into production, in full knowledge that they were subject to credit approval and the Convention. Moreover, if no confirmation had existed, JML would not have spoken of putting the order “on pause” in July 2022. The court found that the order was indeed confirmed and that more than 24 hours had elapsed by the time of JML’s July 2022 postponement notice, leaving JML without any contractual right to unilaterally cancel the order by reference to that clause.

Legal consequences of the contract being a sale

Once the Contrat was qualified as a sale, JML’s duties were those of a buyer under the Civil Code. Articles 1590, 1601 and 1734 C.c.Q. entitle the creditor to demand full, correct and timely performance, and empower the court to order specific performance in appropriate cases. Article 1734 C.c.Q. provides that the buyer must take delivery of the sold goods and pay the price at the time and place of delivery, and is normally responsible for the costs of the act of sale. The court concluded that JML could not unilaterally terminate or annul the Contrat of sale. Subject to the rules on mitigation of loss, Altek was in principle entitled to insist on JML’s performance by requiring it to take delivery of the Marchandises and pay the agreed price, provided JML had been duly put in default.

Mitigation of damages and good faith

The outcome ultimately turned not on contract qualification, but on mitigation of damages and the creditor’s duty of good faith. Mitigation of loss (or “minimisation du préjudice”) is codified at art. 1479 C.c.Q., which limits a defendant’s liability to the portion of the prejudice that the victim could not reasonably have avoided. Doctrine and case law explain that this duty is part of the broader requirement of prudence, diligence and good faith (arts. 6, 7, 1375 C.c.Q.) and that failure to mitigate reduces recoverable damages because the additional loss is considered indirect and too remote under art. 1609 and art. 1613 C.c.Q. The Court of Appeal in Lebel v. 9067-1959 Québec inc. has described mitigation as an obligation of means judged by the standard of a reasonable, diligent person in the same circumstances, applying in both contractual and extra-contractual settings. In Desrosiers v. Lécuyer, the Superior Court listed factors for assessing mitigation efforts, including the time before mitigation steps were taken, the duration of those efforts and the relationship between time spent and the amount claimed. The burden rests on the debtor to show that the creditor failed to mitigate by demonstrating that reasonable steps would likely have reduced the loss.

In this dispute, JML argued that Altek was imprudent and failed to mitigate in two respects: first, by ignoring the July 2022 notice putting the project “on hold” and pressing ahead with production; and second, by making no effort to resell or otherwise dispose of the goods after JML’s refusal to take delivery in July 2023. Altek responded that a delay did not amount to a suspension or cancellation, so it had to continue production, and that its obligation was primarily to conserve the goods in good condition and tender them to JML upon payment of the price. It offered to deliver the Marchandises against payment, with interest.

Court’s assessment of the parties’ conduct

The court found that from 10 July 2023—the date JML refused to take delivery—Altek took no steps at all to reduce its loss. Instead of exploring resale options or other avenues to limit its exposure, Altek chose to rely on the “strict” terms of the sales contract and wait for a favorable judgment. Citing the Court of Appeal in Groupe Van Houtte inc., the judge underscored that strict contractual rights are not absolute and that even a creditor holding a right to payment must still mitigate its damages. More seriously for Altek, the court considered its behavior in response to the July 2022 postponement notice. At that point, the July email clearly indicated that the project was being delayed to an unspecified future date, possibly the spring of 2023. Evidence from Fenplast’s internal systems, explained at trial by its senior director Mme Annie Brault, showed that as of 15 July 2022 production of the Marchandises had not yet begun or been completed. A prudent, diligent supplier would have promptly checked on production status upon receiving such a notice and explored the possibility of suspending fabrication until new instructions were received. The court was skeptical of Gagné’s claim that he did not know whether production had already occurred by 30 August 2022 and found Altek’s hesitance and delay in disclosing the actual production date to be strong indicators of fault.

The judge concluded that Altek either acted negligently or failed in its duty of good faith by not inquiring, as early as July 2022, whether production could be suspended. This was particularly unreasonable given that the required order date had been moved to 7 March 2023 and that production was only completed on 17 March 2023. The court held that in these circumstances, Altek’s own fault broke the chain of causation: its material loss did not represent a direct and immediate consequence of JML’s conduct but was, to a significant degree, the result of its own refusal to adapt and mitigate.

Ruling and overall outcome

In the result, while the court accepted that the agreement between Altek and JML was a contract of sale and that JML had no unilateral right of cancellation under the Convention once the order had been confirmed for more than 24 hours, it ultimately dismissed Altek’s claim because of its failure to mitigate and its lack of prudence and good faith in managing both production and the finished goods. The court found that Altek’s approach—continuing production despite the postponement notice, then making no effort to resell or otherwise limit losses after JML’s definitive refusal to take delivery—meant that its alleged financial prejudice was not a direct and immediate result of JML’s default. For these reasons, the Superior Court rejected the plaintiff’s action in its entirety and ordered it to pay judicial costs in favor of the defendant. The successful party is therefore Groupe JML inc. The judgment does not state any precise amount for costs, and no monetary damages or contract price are awarded; the total amount ordered in JML’s favor is limited to standard court costs, the exact dollar figure of which cannot be determined from the decision itself.