068.162E-VDU Winter 2013

NOTHING RIDES LIKE A SKI-DOOTM
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VANESSA UDY
ROBIC, LLP
LAWYERS, PATENT AND TRADE-MARK AGENTS
On September 19, 2012, the Quebec Court of Appeal rendered a judgment quashing
the lower court's ruling ordering Bombardier Recreational Products Inc. ("BRP") to
pay damages to Christian Moto Sport Inc. ("CMS"), one of its dealers [[Bombardier
Produits Récréatifs inc. (BRP) c. Christian Moto Sport inc., 2012 QCCA 1670].]. The
main issue with which the Court was seized was whether a supplier under a
dealership agreement which is automatically renewable for additional fixed terms
may invoke a clause allowing it to avoid renewal at its discretion.
From 1995 to 2005, CMS operated a dealership specializing in the retail of
Bombardier brand snowmobiles and all-terrain vehicles. In 2003, CMS opened a new
dealership specializing in the sale of Yamaha snowmobiles, in spite of BRP's warning
that such action would constitute a breach of the non-competition clause contained in
the dealership agreement between the parties. In June 2004, following CMS's breach
of its contractual obligations, BRP advised CMS in writing that it would not renew the
contract, which was set to expire in 2005. The parties attempted to reach a mutually
agreeable solution, without success. As a result of BRP's refusal to renew the
agreement, CMS shut down its BRP dealership in mid-April 2005.
In this case, the dealership agreement had a fixed term. The parties had agreed that
the contract would be automatically renewed at the end of each term unless BRP
decided, in its sole discretion, not to renew.
It may be surprising but, according to case law, such a clause is not abusive and
therefore cannot be struck down pursuant to Article 1437 of the C.C.Q. Though
regrettable from the dealer's point of view, the rule under general contract law is that
the parties are free to decide whether they wish to be bound by the agreement
beyond the initial term. The clause contained in the agreement between BRP and
CMS simply recognizes the parties' freedom to contract.
CMS alleged that BRP had exercised its right of non-renewal in an abusive manner,
which is prohibited under Articles 7 and 1375 of the C.C.Q.
© CIPS, 2013.
*
From ROBIC, LLP, a multidisciplinary firm of Lawyers, and Patent and Trade-mark Agents. Published
in the Winter 2013 (Vol. 16, no. 4) Newsletter of the firm. Publication 068.162E.
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According to the Court of Appeal, BRP's decision not to renew the dealership contract
does not in of itself conflict with its duty to act fairly and in good faith in the exercise of
its contractual rights. It befalls to the party adhering to the contract to submit convincing
proof of the other's lack of good faith and the abusive nature of the exercise of its rights.
The Court concluded that the evidence in this case demonstrated the opposite. Firstly,
BRP had given nine months written notice, which the Court found sufficient, and then
had extended a generous offer to CMS for the repurchase of leftover inventory, which it
was not obliged to do under the agreement.
One can learn from this case that a supplier under a dealership agreement may avail
itself of a non-renewal clause, so long as it exercises its rights in good faith. In
particular, a notice of non-renewal should provide the dealer with a sufficient delay to
permit it to mitigate its damages.
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