Unilateral termination by the customer: what to do to avoid or remedy it

Under the Civil Code of Quebec, a customer can unilaterally terminate a business or service contract¹. Unlike an entrepreneur who can only cancel for serious reasons², the customer can do it without specific reasons³, at the expense of the entrepreneur. It is therefore important to provide an overview of this unilateral termination and what can be done by entrepreneurs to avoid this termination or remedy a termination that they consider abusive.

How does unilateral cancellation by the customer work?

An important bond of trust exists between a customer and an entrepreneur, considering that the latter has the free choice of contract execution⁴. When this bond of trust is broken, the customer must be able to end the work if he wishes. On the other hand, his desire to terminate the contract must be clear, even if this desire is expressed tacitly.⁵. Termination can be done at any time following the signing of the contract of employment, even if the work has already begun.⁶. When there is a cancellation during the work, the contractor must in principle be compensated for the work he has already done, for his costs and expenses and in some cases, for the value of the goods he has supplied⁷.

What can an entrepreneur do to avoid a termination or remedy a termination that he considers abusive?

The entrepreneur can insert a clause in the business contract, which provides that the customer renounces his right of unilateral termination under article 2125 of the Civil Code of Quebec. Indeed, this article is not of public order⁸; the parties can therefore agree in any way they wish. Even if such a clause is not provided for in the contract and the customer exercises his right of unilateral termination without specific reasons, he cannot terminate in an abusive manner that is incompatible with the requirements of good faith.⁹. In fact, at the request of an entrepreneur, the court can examine the customer's reason for terminating and see if there was an abuse of rights.¹⁰. An abusive termination of a contract of employment occurs when the customer invokes false or ill-founded reasons, or when the customer terminates without cause for an illegitimate or undisclosed purpose¹¹ .

For example, the termination of a contract by a customer for the sole purpose of re-testing a market and obtaining a reduction in the cost of the project was considered abusive.¹². An entrepreneur who suffers damage as a result of a so-called abusive termination may claim damages from the customer.¹³, under article 2129 paragraph 3 of the Civil Code of Quebec, including damages for loss of profits in some cases, although this is rarely granted¹⁴. Alternatively, the parties may insert a clause into the contract, which assesses in advance the harm that an entrepreneur will suffer if the customer terminates the contract.¹⁵.

All in all, unilateral termination by the customer can have serious consequences for a company. To protect themselves against unpleasant surprises during the work, it is therefore important for contractors to draft their contracts well, and if possible, to insert clauses that exclude or limit the customer's right to unilaterally terminate the contract.

1. Article 2125 of the Civil Code of Quebec.
2. Article 2126 of the Civil Code of Quebec.
3. Consultants Gauthier Morel inc. v. City of Laval, 2020 QCCS 3497, para. 44.
4. Article 2099 of the Civil Code of Quebec.
5. Phoenix Flight Operations Ltd. v. Royal Aviation Inc., 2000 QCCS 29916, para. 38.
6. Article 2125 of the Civil Code of Quebec.
7. Article 2129 of the Civil Code of Quebec.
8. Gagnon v. Bell Mobility Inc., 2016 QCCA 1496, para. 20.
9. For-Net (Quebec Inc.) v. University of Quebec at Trois-Rivières, 2013 QCCS 1431, para. 157.
10. Consultants Gauthier Morel inc. v. City of Laval, supra note 3, para. 45.
11. Id.
12. Roch Lessard Inc. v. Immobilère S.H.Q., 2003 QCCS 32361, para. 57.
13. For-Net (Quebec Inc.) v. University of Quebec at Trois-Rivières, supra note 9.
14. Roch Lessard Inc. v. Immobilère S.H.Q., supra note 12, para. 60.
15. Gagnon v. Bell Mobility Inc., supra. Note 8, para. 155.

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