Assignment of Contracts

2005-01-01

1
ASSIGNMENTOFCONTRACTS

Marie-ÈveCôté*
LEGERROBICRICHARD
,L.L.P.
Lawyers,PatentandTrademarkAgents
CentreCDPCapital
1001Square-Victoria–BlocE–8thFloor
Montreal,Quebec,CanadaH2Z2B7
Tel.(514)9876242–Fax(514)8457874
www.robic.ca–info@robic.com

Fromabusinessperspective,varioussituationsmayarisewherebyitbecomes
necessarytotransferacontracttoathirdparty.Forexample,itmaybe
necessarytoassignimportantcontractswithinthecontextofthesaleof
certainassetsortechnologytransfers.
Itconsequentlybecomesparamountforalegalrepresentativetodetermine
themannerinwhichandunderwhatconditionsacontractmaybeassigned,
aswellastheconsequencesofsuchanassignment.
Inanefforttoestablishifacontractmayindeedbeassigned,thefirststep
consistsofverifyingtheclausespertainingtoassignment.Generallyspeaking,
underQuebeclaw,contractsareconsideredtoreflecttheintentionsofthe
contractingpartiesandassuchgoverntheircontractualrelationship.Theonly
conditionisthatthepartiesrespectrulesofpublicorder.Assuch,itispossible
tostipulateinthecontractitselfwhetherornotitmaybeassigned,towhom
(sometimescontractsmayonlybeassignedtoaffiliatedpersonsorentities,
othertimessuchcontractsmayalsobeassignedtothepurchaserof
substantiallyallassetsorofthebusiness),andunderwhatconditions
(remittanceofanotice,approvalbytheotherparty,etc.).
Intheabsenceofanyindicationregardingeitherparty’srighttoassignthe
contractoraprohibitionfromdoingso,wemustrelyonthecaselaw.Priorto
thedecisioninN.C.HuttonLtd.c.CanadianPacificForestProductsLtd.,REJB
1999-15643(C.A.)renderedbytheCourtofAppealin1999,thereexistedfew
casesinQuebecregardingtheassignmentofcontracts.Suchcircumstances
infactpromptedJusticeBaudouintorefertoFrenchauthorities.Withregards
tothemannerinwhichcontractsmayindeedbeassigned,JusticeBaudouin
explainedthetwodifferentexistingschoolsofthoughtinFrance.Thefirst

©CIPS,2005.*OfLEGERROBICRICHARD,L.L.P.,amultidisciplinaryfirmoflawyers,andpatentand
trademarkagents.PublishedintheWinter2005issue(Vol.9,No.1)issueofourNewsletter.
Publication068.066E.

2
arguesthatacontractshouldberegardedasaneconomicoperationby
whicheitherpartymayassignthecontractwithoutfirstobtainingtheconsent
oftheother,insofarastheinitialeconomicoperationispreservedinits
entirety.Asforthesecond,itconsidersthatobligingapartytoacontract,be
itintuitupersonaeorotherwise,toacceptanewcontractingpartyisboth
difficultandlikelytoprovokeconflictsandaccordingly,theapprovalofthe
otherpartymustbesought.Inrenderinghisdecision,JusticeBaudouin
indicatedthatin1997,theFrenchCourdecassationhadrendereda
judgementfavouringthelatterapproach(Cass.Com.,6mai1997,D-97-
Jur.588).ThisapproachwasalsoadoptedbyJusticeBaudouinwho
concludedthatitwasnecessaryfortheassignortoobtaintheconsentofthe
assignedandthatsuchconsentcouldbeobtainedinadvance,forexample,
whenexecutingthecontract.
RelyingonFrenchlaw,JusticeBaudouinwentontodiscussthelegal
implicationsinvolvedinassigningacontract,particularlyindetermining
whethersuchassignmentprovokesthereleaseoftheassignorvis-à-visthe
assigned.Assigningacontractisregardedbymanyauthorsashavinga
translativeeffect,wherebytheassigneereplacestheassignor,thusreleasing
thelatter.Otherauthorsarguethatinassigningacontract,anewcontract,
identicaltothefirst,isformedinwhichcasetheassignorisnotreleasedfrom
itsobligationsvis-à-vistheassigned.Suchaninterpretationseemstohave
beenfavoredbytheSuperiorCourtinGeneralAccidentInsuranceCo.c.
Cie.DeChauffageGazNaturel[1978]C.S.1160.AccordingtoJustice
Baudouin,theassignmentofacontractcannotbeequatedtonovationora
delegationofpayment(whichinanyeventcannotbepresumed),wherethe
assignorwouldbereleased.Anassignmentwouldconsequentlyleadtothe
additionandnotthereplacementofthedebtor.
In2000,inmakingreferencetotheHuttoncase,theQuebecSuperiorCourt
decidedinSteamaticCanadainc.c.GestionA.D.R.inc.(SteamaticCentre
duQuébec),C.S.Drummond(Drummondville)405-05-001137-009,2000-10-19,
AZ-50081131,J.E.2001-47(Jean-PierreSénécalJ.)thatanassignmentmay
onlybeenforceableandbindingagainsttheassignediftheassignorhas
obtainedtheformer’sconsentpriortoassigningthecontracttotheassignee.
TheCourtdidhowevermentionthattheCivilCodeofQuebecdoesnot
provideforthemannerinwhichsuchapprovalistobegiven.Asa
consequence,theCourt,referringtoSection1641oftheCode,decidedthat
itwasnotimperativethattheassignorobtainaformalconsentofthe
assignedpriortotheassignmentofthecontract.AccordingtosuchSection,
theassignmentmaybesetupagainstthedebtorandathirdpersonassoon
asthedebtorhasacquiescedtoitorreceivedacopyorarelevantextractof
thedeedofassignmentoranyotherevidenceoftheassignmentwhichmay
besetupagainsttheassignor.Infact,theCourtindicatedthatsuchconsent

3
maybeinferredfromtheactionsoftheassigned.Forexample,iftheassigned
continuestoremitroyaltiestotheassigneewithoutobjection,consentofthe
assignedmaybeinferred.Incircumstanceswheretheassignedhasneither
beeninformedoftheassignmentintheprescribedmanner,norexplicitly
consentedtosuchanassignment,onecanacknowledge,especiallyin
commercialmatters,aswasthecaseinHutton,thatconsentoftheassigned
maybeimplicit.
Consequently,onemustrememberthatintheabsenceofanystipulation
regardingtheassignmentofacontract,itiscrucialthattheassignorfirst
obtaintheapprovaloftheassignedforanassignmentofacontracttobe
enforceableandbindingand,dependingontheintentionsoftheparties,
thatsuchassignmentresultinthereleaseoftheassignorvis-à-vistheassigned.
Donothesitatetocontactalawyerfromthecommercial/corporatesectorof
ourGroupifadditionalinformationregardingthissubjectisrequired.

4
ROBIC,ungroupedavocatsetdagentsdebrevetsetdemarquesde
commercevouédepuis1892àlaprotectionetàlavalorisationdela
propriétéintellectuelledanstouslesdomaines:brevets,dessinsindustrielset
modèlesutilitaires;marquesdecommerce,marquesdecertificationet
appellationsdorigine;droitsdauteur,propriétélittéraireetartistique,droits
voisinsetdelartisteinterprète;informatique,logicielsetcircuitsintégrés;
biotechnologies,pharmaceutiquesetobtentionsvégétales;secretsde
commerce,know-howetconcurrence;licences,franchisesettransfertsde
technologies;commerceélectronique,distributionetdroitdesaffaires;
marquage,publicitéetétiquetage;poursuite,litigeetarbitrage;vérification
diligenteetaudit;etce,tantauCanadaquailleursdanslemonde.La
maîtrisedesintangibles.ROBIC,agroupoflawyersandofpatentand
trademarkagentsdedicatedsince1892totheprotectionandthe
valorizationofallfieldsofintellectualproperty:patents,industrialdesignsand
utilitypatents;trademarks,certificationmarksandindicationsoforigin;
copyrightandentertainmentlaw,artistsandperformers,neighbouringrights;
computer,softwareandintegratedcircuits;biotechnologies,
pharmaceuticalsandplantbreeders;tradesecrets,know-how,competition
andanti-trust;licensing,franchisingandtechnologytransfers;e-commerce,
distributionandbusinesslaw;marketing,publicityandlabelling;prosecution
litigationandarbitration;duediligence;inCanadaandthroughouttheworld.
Ideaslivehere.
COPYRIGHTER
IDEASLIVEHERE
ILATOUTDEMÊMEFALLULINVENTER!
LAMAÎTRISEDESINTANGIBLES
LEGERROBICRICHARD
NOSFENÊTRESGRANDESOUVERTESSURLEMONDEDESAFFAIRES
PATENTER
R
ROBIC
ROBIC+DROIT+AFFAIRES+SCIENCES+ARTS
ROBIC++++
ROBIC+LAW+BUSINESS+SCIENCE+ART
THETRADEMARKERGROUP
TRADEMARKER
VOSIDÉESÀLAPORTÉEDUMONDE,DESAFFAIRESÀLAGRANDEURDELA
PLANÈTE
YOURBUSINESSISTHEWORLDOFIDEAS;OURBUSINESSBRINGSYOURIDEASTO
THEWORLD