In Uniprix Inc. v. Gestion Gosselin et Bérubé Inc., 2015 QCCA 1427, the Court of Appeal of Québec dismissed the appeal by Uniprix Inc. (“Uniprix”) of a judgment of the Superior Court of Québec rendered in December 2013 where a renewal clause in a contract of affiliation which did not limit the number of times the agreement could be renewed was found valid and enforceable. The Court of Appeal of Québec upheld the validity of the perpetual renewal clause.
The parties were contractually bound by a contract of affiliation dated January 28, 1998 under which the respondents, Gestion Gosselin et Bérubé Inc. and Manon Gosselin et Bernard Bérubé, Pharmaciens, s.e.n.c., were operating a pharmacy under Uniprix’s banner. The disputed renewal clause of the contract stipulated that the respondents had to notify, six months before the expiration of the agreement, their intention to leave the banner or to renew the agreement. In the event that the respondents decided not to send such notice of intention, the agreement was deemed renewed for an additional five years.
In 2012, Uniprix sent a notice, six months prior to the expiration of the agreement, to the respondents stating that the renewal clause was stipulated in its favor and that it had decided to terminate the agreement. The respondents challenged Uniprix’s notice of termination and filed a motion for declaratory judgement and injunction under which it requested the Superior Court of Québec to declare that, in accordance with the renewal clause, the contract was renewed until January 2018. In defense, Uniprix argued that if the clause was to be interpreted as stating an unlimited number of renewals, it would create a perpetual agreement which would be unlawful.
In its decision, the Superior Court of Québec declared that the clause was clear and unambiguous and that automatic renewal clauses under which a unilateral renewal right is granted to one of the parties are valid. In this case, the renewal clause was stipulated in the respondents’ favor. Therefore, the Superior Court of Québec found Uniprix’s arguments groundless.
The Court of Appeal of Québec upheld the judgement of the Superior Court of Québec declaring valid the renewal clause which did not limit the number of possible renewals. In Québec, there is no general provision specifically prohibiting perpetual contracts and the principle of freedom of contract should be preserved where the legislator has not imposed limitations.
We can conclude from this recent decision that franchise and affiliate networks and banner associations are bound to respect unlimited renewal clauses when stipulated in their agreements. It is now clear that such renewal clauses are not prohibited in Québec.