Regardless of context — be it contractual negotiations, performance or litigation — counsel practicing outside of Quebec should always be careful when interpreting a contract that is governed and construed in accordance with Quebec law.
While an in-depth discussion of all the relevant specificities of Quebec law in this area is beyond the scope of this brief article, we will provide a bird’s-eye view of how Quebec law tackles the interpretation of contractual terms, express or implied.
FINDING THE COMMON INTENTION OF THE PARTIES
In principle, the actual will of the parties is paramount in Quebec law, and the terms of any contract are to be ascertained from all the facts legally proven, not just from a particular document.
In practice, the rules of evidence set out in Quebec’s Civil Code will give precedence to the literal word when the court determines that the common intention of the parties appears clearly. If the court finds the contract ambiguous, it will consider appropriate evidence to interpret it. Otherwise, the parties may not contradict or vary an unambiguous contract, unless there is a “commencement of proof” that would allow for such a contradiction. A commencement of proof is something that “renders plausible the alleged fact” and may arise from an admission, a document or the testimony of the other party or some physical evidence. Of course, the clearer the contract, the more reluctant Quebec courts will be to find a need to “interpret” it. A commencement of proof will, therefore, serve to attempt to show some underlying ambiguity and sow seeds of doubt.
When interpretation is required, Quebec law places strong emphasis on the circumstances in which the deal was struck. These circumstances include the interpretation the parties have given it — whether explicitly or implicitly — and usage, all of which may constitute evidence of the parties’ will and serve to interpret the contract. Quebec’s approach, therefore, bears elements of subjectivity, and the court will generally take a flexible approach to determine the common intention of the parties. For instance, the Quebec Court of Appeal recently upheld a judgment of the Quebec Superior Court in which the court, by declaration, modified a clause in a loan agreement because the evidence revealed a discrepancy between the real intention of the parties and the wording of the contract.
In Quebec, a contract binds the parties to what they have expressed in it but also to that which can be implied in light of the nature of the contract and given usage, equity or law.
For the purposes hereof, we will limit ourselves to a few important considerations, among various others. First, the notion of “equity” applied in Quebec law is equity in its general sense and is connected to concerns for “fairness in contract.” As such, Quebec law’s focus is on the fair balancing of obligations, and terms may be implied on this basis.
Secondly, the Supreme Court of Canada recently held that good-faith contractual performance is an “organizing principle” of contract law in Canada’s common law jurisdictions, but under Quebec law, the duty to act in good faith is statutorily implied in every contract and at every stage of the contractual relationship. Indeed, the parties must conduct themselves in good faith “at the time the obligation arises” as well as during performance or when the obligation is extinguished.
Quebec’s Civil Code also contains various provisions dealing with external clauses, abusive clauses, penal clauses, illegible and incomprehensible clauses, and so on, to name a few, and also provides for a great number of statutorily imposed terms in what it calls “nominate” contracts (such as leases or contracts for services, which have rights and obligations specially prescribed by law).
In the end, Quebec courts, just like those elsewhere in Canada, strive to get the meaning right when interpreting a contract. Unfortunately, contractual interpretation can be a challenging exercise, often fraught with a certain degree of risk. There is certainly no shortage of considerations to bear in mind when interpreting contractual terms, express or implied.
While the foregoing is merely intended to provide some practical information, it is admittedly far from being exhaustive. It is, therefore, always useful and prudent to be on guard when dealing with a contract governed and construed in accordance with Quebec law, and to seek professional advice whenever the stakes warrant it.
Gerry Apostolatos and Pascal Archambault are lawyers with Langlois LLP.