Nothing Rides Likes a Ski-DooTM

2013-03-13

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NOTHINGRIDESLIKEASKI-DOOTM

VANESSAUDY*
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OnSeptember19,2012,theQuebecCourtofAppealrenderedajudgmentquashing
thelowercourt’srulingorderingBombardierRecreationalProductsInc.(“BRP”)to
paydamagestoChristianMotoSportInc.(“CMS”),oneofitsdealers[[Bombardier
ProduitsRécréatifsinc.(BRP)c.ChristianMotoSportinc.,2012QCCA1670].].The
mainissuewithwhichtheCourtwasseizedwaswhetherasupplierundera
dealershipagreementwhichisautomaticallyrenewableforadditionalfixedterms
mayinvokeaclauseallowingittoavoidrenewalatitsdiscretion.

From1995to2005,CMSoperatedadealershipspecializingintheretailof
Bombardierbrandsnowmobilesandall-terrainvehicles.In2003,CMSopenedanew
dealershipspecializinginthesaleofYamahasnowmobiles,inspiteofBRP’swarning
thatsuchactionwouldconstituteabreachofthenon-competitionclausecontainedin
thedealershipagreementbetweentheparties.InJune2004,followingCMS’sbreach
ofitscontractualobligations,BRPadvisedCMSinwritingthatitwouldnotrenewthe
contract,whichwassettoexpirein2005.Thepartiesattemptedtoreachamutually
agreeablesolution,withoutsuccess.AsaresultofBRP’srefusaltorenewthe
agreement,CMSshutdownitsBRPdealershipinmid-April2005.

Inthiscase,thedealershipagreementhadafixedterm.Thepartieshadagreedthat
thecontractwouldbeautomaticallyrenewedattheendofeachtermunlessBRP
decided,initssolediscretion,nottorenew.
Itmaybesurprisingbut,accordingtocaselaw,suchaclauseisnotabusiveand
thereforecannotbestruckdownpursuanttoArticle1437oftheC.C.Q.Though
regrettablefromthedealer’spointofview,theruleundergeneralcontractlawisthat
thepartiesarefreetodecidewhethertheywishtobeboundbytheagreement
beyondtheinitialterm.TheclausecontainedintheagreementbetweenBRPand
CMSsimplyrecognizestheparties’freedomtocontract.

CMSallegedthatBRPhadexerciseditsrightofnon-renewalinanabusivemanner,
whichisprohibitedunderArticles7and1375oftheC.C.Q.

©CIPS,2013.*FromROBIC,LLP,amultidisciplinaryfirmofLawyers,andPatentandTrade-markAgents.Published
intheWinter2013(Vol.16,no.4)Newsletterofthefirm.Publication068.162E.

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AccordingtotheCourtofAppeal,BRP’sdecisionnottorenewthedealershipcontract
doesnotinofitselfconflictwithitsdutytoactfairlyandingoodfaithintheexerciseof
itscontractualrights.Itbefallstothepartyadheringtothecontracttosubmitconvincing
proofoftheother’slackofgoodfaithandtheabusivenatureoftheexerciseofitsrights.
TheCourtconcludedthattheevidenceinthiscasedemonstratedtheopposite.Firstly,
BRPhadgivenninemonthswrittennotice,whichtheCourtfoundsufficient,andthen
hadextendedagenerousoffertoCMSfortherepurchaseofleftoverinventory,whichit
wasnotobligedtodoundertheagreement.
Onecanlearnfromthiscasethatasupplierunderadealershipagreementmayavail
itselfofanon-renewalclause,solongasitexercisesitsrightsingoodfaith.In
particular,anoticeofnon-renewalshouldprovidethedealerwithasufficientdelayto
permitittomitigateitsdamages.

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