Canada: Termination Clauses In Service Agreements Must Be Crystal Clear

Last Updated: April 19 2013
Article by Sébastien Vézina

Written with the collaboration of Robert La Rosa

In 2012, the Superior Court of Québec rendered a decision in MDV Representations v. Corporation Xprima.com1 that serves as a reminder to all Québec service providers and theirclients that they must use clear and simple language when drafting termination clauses.Moreover, if parties wish to renounce to any rights in the Civil Code of Québec ("CCQ"), theymust make specific reference thereto. This decision is of importance to those wishing toconduct business in Québec's booming mining industry, and is particularly interesting toengineering firms and other professionals, and to their respective clients.

Overview of the Decision

In MDV Representations, the Superior Court dismissed the claims of two plaintiff service providers, M.D.V. Representations and MC 3 Média Inc., which argued that the defendant Xprima had wrongly terminated their service contracts.

The Court examined two articles of the CCQ that are relevant to the service provider industry. Firstly, the Court considered art. 2125 CCQ, which allows a client to unilaterally resiliate a service contract "even though the work or provision of service is already in progress". Secondly, an analysis of art. 2129 CCQ was undertaken.

Article 2125 CCQ allows a client to cut ties with its service provider without any prior warning, despite the fact that the service being provided is ongoing. Québec courts have determined that this article is not of public order. Therefore, parties can renounce to or contract out of its application in their service contracts by outlining specific conditions which would give rise to a resiliation. For example, the Plaintiffs in MDV Representations entered into a 2-year service contract with Xprima whose termination clause explicitly stated that the latter could only rescind the contract on August 7, 2007, and, if it did not reach a financial target of at least $1,000,000 in sales.

While such specific language may appear to reflect the parties' intent to renounce to their rights in art. 2125 CCQ by outlining the circumstances under which Xprima may terminate its service contract, the Court nevertheless refused to give it effect. In doing so, it held that although art. 2125 CCQ is not of public order, a renunciation to the rights therein is only valid when expressed unequivocally. In this regard, the language employed in the termination clause had to clearly express the parties' intent, without leaving any room for interpretation. The Court also highlighted that a contract for services that has a fixed term does not necessarily demonstrate the parties' intent to renounce to their rights in art.2125 CCQ. For these reasons, the Court refused to give the termination clause effect and upheld Xprima's right to terminate its service contracts prematurely.

Since the Court refused to enforce the termination clause, the Plaintiffs sought compensation from the Defendant under art. 2129 CCQ, which states:

2129. Upon resiliation of the contract, the client is bound to pay to the contractor or the provider of services, in proportion to the agreed price, the actual costs and expenses, the value of the work performed before the end of the contract or before the notice of resiliation and, as the case may be, the value of the property furnished, where it can be returned to him and used by him.

For his part, the contractor or the provider of services is bound to repay any advances he has received in excess of what he has earned.

In either case, each party is liable for any other injury that the other party may have suffered.

Clearly, the first paragraph of this article requires that the client pay any costs or expenses owed for the services rendered up until the termination date. However, the third paragraph allows the service provider to claim for "any other injury that the other party may have suffered". In hopes taking advantage on those general terms, the Plaintiffs claimed compensation for their future loss of profits resulting from Xprima's early termination.

After surveying the jurisprudence, the Court held that, under art.2129 CCQ, future loss of profits will only be awarded when the client has terminated the service contract in bad faith or in an abusive manner. Although Xprima's reasons for terminating the contract were minor, for example, it expressed annoyance with the plaintiffs' tardiness in producing bimonthly reports, the Court did not consider these complaints to constitute bad faith. In fact, the Court held that the onus is not on the client to justify the unilateral resiliation. Rather, it is the service provider that must prove bad faith on the client's part, despite the fact that nearly any reason, including minor gripes, serves as sufficient grounds for rescission.

How does this decision impact the Plan Nord?

The decision in MDV Representations sends a clear reminder to Québec's booming mining industry to use clear and simple language when renouncing to rights in the CCQ. Indeed, with anticipation that the development projects in northern Quebec will be at an alltime high and with significant capital at stake, leading corporations, equipment suppliers, expert environmentalists, geologists and engineers, to name a few, are concluding contracts in order to get a piece of the action. It is important that these actors heed the Superior Court's warning to avoid being left out in the cold!

Most importantly, eager participants need to be aware of the reality that "industry standard" service provider contracts may result in undesirable outcomes, as was the case in MDV Representations. This warning is particularly important in the mining context. While service providers seek to diminish their clients' ability to cut ties without any motive or warning by imposing stiff penalties for doing so, mining companies try to limit their potential exposure by minimizing their obligation to pay a service provider whose services may not be needed in the future. Evidently, both actors come into the bargaining process with very different objectives. While service providers want to renounce to the rights in the CCQ so as to make any divorce as costly as possible, their clients are quite comfortable doing things by the book. As in any negotiation, it is imperative that both parties find a middle ground and draft reasonable and fair termination clauses that protect their mutual interests.

In this regard, the Superior Court's ruling in MDV Representations does shed light on several critical lessons.

Lesson 1: Termination clauses should make specific reference to the article of the CCQ to which parties wish to renounce

It is important that service providers and their clients pay particular attention when drafting "Termination" or "Rescission" clauses. While the Plaintiffs' contracts in MDV Representations seemed to renounce to the right conferred by article 2125 CCQ by defining narrow parameters in which Xprima could unilaterally terminate the agreement, the Court found the clause to be ambiguous. An effective way to avoid this pitfall is to draft termination clauses containing the explicit renunciation of the right in article 2125 CCQ or any other right that is not of public order. This method of drafting will make things easier for the court.

Lesson 2: Consider including a liquidated damages clause to compensate for the future loss of profits

When a client prematurely terminates a service contract, the financial impact extends far beyond the present since the service provider will lose any profits it expected to earn throughout the life of the contract. Given that courts exercise great restraint in awarding damages for future losses, more and more service providers are including "Liquidated Damages" clauses in their service agreements to compensate for these losses.

It is suggested that the parties agree to a dollar amount representing liquidated damages that must be paid by the client upon early termination. A liquidated damages clause can favour both parties since they can negotiate terms of applicability that reflect their mutual interests. For example, one method of quantifying damages may be to establish a scale whereby the earlier the contract is terminated, the higher the amount of damages. This method would give the service provider more financial security in the event of an early termination, while also offering the client the ability to pay less if the provider's services are no longer needed farther along into the project. Such compromises not only provide a more fair and equitable solution for both parties, but also allow for greater flexibility and security.


1 2012 QCCS 2451.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.