The Court of Appeal ruled that the restrictive covenants found
in the asset purchase agreement were mistakenly interpreted by the
trial judge pursuant to the rules governing employment contracts as
set forth at Articles 2089 and 2095 of the Civil Code of
Quebec, and upheld the relevant clauses.
The Court of Appeal found that the evidence unequivocally showed
that the clauses were included for the benefit of the sellers, in
the context of the asset deal with Guay Inc., and not in respect of
the employment relationship.
Surprisingly, the court also declared that the said clauses
remained valid even though Mr. Payette's termination date was
used in order to calculate the duration of his
non‑competition and non‑solicitation
obligations, which did not affect the conclusion that the clauses
were included in the context of a business sale.
The important question in this case was to determine whether the
restrictive covenants were included as part of an employment
contract or business sale. Since Payette was dismissed without
cause, it would not have been possible to enforce the
non‑competition clause had it been part of an employment
In addition, the court affirmed that the parameters used in
restrictive covenants (duration, territory and targeted activities)
stay the same, whether they are found in employment contracts or
business sale contracts, although tribunals will be more flexible
in accepting such criteria in the latter case than the former.
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