Appellant Europe Cosmétiques Inc. and Respondent
Location Le Carrefour Laval Inc., owner of a mall, signed
a Letter of Intent for the rental of a two-story commercial
building. Under the Letter of Intent, Appellant agreed to partake
in the construction of a medical spa that would be considered as an
extension of the mall.
Through its real estate broker, Appellant waived the financing
condition stipulated in the Letter of Intent. After the completion
of the works, the parties negotiated a Lease Agreement, the
signature of which was delayed by the fact that Appellant had not
yet received its financing. After a substantial waiting time,
Respondent brought an action against Appellant for damages and
breach of the Letter of Intent. A year later, Respondent managed to
rent one of the two floors of the building to a new tenant.
The trial judge held that the Letter of Intent was indeed a
promise to enter into a contract under section 1396 of the
Civil Code of Québec (L.R.Q. 1991, c. C-1991) (the
"CCQ.") and that the award should then
be fully granted with regard to the sum representing the
development and conversion costs of the leased property. With
regard to the claim for unpaid rent, the trial judge limited the
award to the square footage that was not rented by the new
The Court partially allowed the appeal and reduced the award for
the development and property conversion costs, while at the same
time increasing the award for unpaid rent. The Court concluded that
the Letter of Intent was indeed a promise to enter into a contract
under section 1396 of the CCQ, since the document signed by the
parties contained all the necessary elements of a lease, namely the
property, the use, the rent and the rental period.
The Court held that the intention of the parties was to be bound
by this Letter of Intent, as was demonstrated by Appellant's
waiver of the financing clause. With regard to the claim for unpaid
rent, the Court held that Respondent should be compensated for the
amount it would have received had the Lease Agreement actually been
signed. With regard to the development and property conversion
costs, the Court held that some of the expenses were justified
because they did not constitute double compensation.
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