The Specific Regime For Termination Of A Contract Of Enterprise Or A Contract For Services: Pros And Cons

Author:Miss Stéphanie Fortier-Dumais and Charles Lapointe
Profession:Langlois lawyers, LLP
 
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A contract of enterprise or a contract for services is an agreement whereby a contractor or service provider undertakes to perform physical or intellectual work or to provide one or more services to the other party to the contract, the "client", in exchange for remuneration.

This type of contract does not need to be in any particular form to be valid1; only the parties' free and clear consent to be bound by it is necessary for its valid formation. However, the Civil Code of Québec (the "CCQ") contains several specific rules that apply to the termination of such a contract, which differ markedly from the rules applicable under the general law of contract.

In what circumstances can one of the parties terminate a contract of enterprise or a contract for services?

The rule of the binding force of contracts pursuant to the general law is to the effect that the parties cannot unilaterally put an end to their obligations2. In order to be able to do so, the other party must have committed a fault, namely failure to perform, or inadequate performance of certain obligations. Thus, the parties are not free to terminate the contract without a valid reason.

Despite this general rule, the legislature has created a simplified regime that is specific to contracts of enterprise or contracts for services. On the one hand, the client can unilaterally terminate a contract that it has freely agreed to, without having to establish that the service provider or contractor committed a fault3. This right is tied to the very nature of the contract, which is predicated on the specific expectations of the client. Nevertheless, the client's right to unilaterally terminate, created by Article 2125 CCQ, is not of public order, such that the client may waive it or the parties may derogate from it, provided that the waiver or derogation is clear, express and unequivocal.

The contractor or service provider, on the other hand, may also terminate the contract unilaterally, but subject to certain conditions4. It first of all may only do so for a serious reason. Such termination has been allowed on several grounds, including repeated interference in the performance of the contractor's work5, and unilaterally changing the conditions of the contract6, but it has not been allowed on the basis of an unfounded fear of not being paid7. Even where sufficient grounds exist, the contract cannot be terminated at an inopportune time or in circumstances where the client would suffer undue...

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