During the first week of December, 2014, the Quebec Court of Appeal rendered two consecutive industry-significant decisions in favour of our client Athena Energy Marketing Inc. (“Athena”)1 involving the interpretation and application of contracts for the supply of natural gas.
1.The Victoria Decision – The natural gas supply agreement with the private supplier was a contract of sale
In the matter of 9080-9211 Québec Inc. (hereinafter “Victoria”) versus Athena,2 the Court of Appeal confirmed that the natural gas supply agreement between the parties was one of sale rather than services.3 Athena was found not to be acting as a natural gas dealer or intermediary, but as a seller of natural gas. Victoria was therefore not legally entitled to terminate the natural gas supply agreement at any time, which it could have done with respect to a services contract under certain conditions. It remained bound to honour its contractual obligations despite the marked drop in its natural gas consumption after having sold four of its buildings.
2. The Peyrow Decision – The supplier rightfully applied the contractual clause providing for the resale of unconsumed gas at market price
In the matter of Mehrzad Peyrow (“Peyrow”) versus Athena,4 Peyrow had contractually committed to take delivery of and purchase a fixed quantity of natural gas per year for a five-year term and at a fixed price. Peyrow’s annual gas consumption proved to be significantly less than the fixed quantity he agreed to take delivery of by way of contract.
The Court of Appeal set aside the trial judgment and concluded that, absent any other agreement with its client, Athena was bound to apply the contractual mechanism obliging it to resell Peyrow’s unconsumed natural gas on a monthly basis and at the market price.5
The Court of Appeal also concluded that the trial judge had erred in finding that Athena had made no effort to reach Peyrow in order to allow him to liquidate his unconsumed natural gas in a manner other than that called for in the contract.6 Athena acted in good faith and was bound to apply the contractual resale clause,7 after having offered other possible solutions to Peyrow for the resale of his unconsumed gas.