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Parties in Quebec may agree on a contractual mechanism even though its effects could be perpetual

In Uniprix inc. v. Gestion Gosselin et Bérubé inc., 2017 SCC 43, the Court ruled that where a renewal clause faithfully represented the parties’ common intention, the granting of one party the unilateral option to renew the contract every five years was valid in Quebec law even though such clause might give the contract a perpetual effect.

Contracts — Construction and interpretation — General principles

Chain of pharmacies and its member pharmacists entered into contract of affiliation in 1998 for fixed term of five years — Contract contained automatic renewal clause, which was triggered twice, in 2003 and 2008 — In 2011, chain failed to convince member pharmacists to move into new premises — Chain then sent member pharmacists notice of non-renewal, purporting to terminate contract as of January 2013 — Member pharmacists brought action seeking declaration that contract had been renewed until January 2018 — Trial judge concluded that renewal clause was clear and allowed member pharmacist to automatically renew agreement every five years — Hence, trial judge declared that contract was renewed until January 2018, and chain appealed — Majority of Court of Appeal held that contract could be renewed automatically unless member pharmacists gave notice to contrary — Majority added that chain had not acted in good faith, which barred it from resiliating contract, and upheld trial judge's decision — Chain appealed to Supreme Court of Canada — Appeal dismissed — Relevant clause clearly provided that, should member pharmacists fail to send prescribed notice to chain, agreement would be deemed to have been renewed — Word "deemed" created absolute and irrebuttable presumption — Because member pharmacists actually sent no notice whatsoever, agreement was deemed to have been renewed for additional five-year term — To interpret relevant clause otherwise would be contrary to general scheme of contract of affiliation and to how it has been applied by parties — Further, nothing in Civil Code of Québec prohibited such contracts from having effects that could be perpetual — Therefore, trial judge made no palpable and overriding error in interpreting contract and no intervention was justified.
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