Canada: To The End Of The Term And Beyond: Perpetual Renewal Clauses Are Considered Legal


Automatic renewal provisions are common in franchise agreements, and the Quebec Court of Appeal recently addressed the previously unanswered question of whether a franchise agreement may include a clause that would have the effect of renewing the agreement perpetually. In other words, the Court was called upon to determine whether perpetual obligations are enforceable pursuant to Quebec civil law. In Uniprix v. Gestion Gosselin et Bérubé inc.,1 the Quebec Court of Appeal dismissed an appeal lodged by a drugstore franchisor, Uniprix, in respect of a judgment of the Superior Court of Quebec rendered in December 2013 which upheld the validity of a renewal clause that did not provide any limitation on the number of times a contract of affiliation could be renewed.


In 1998, Uniprix entered into a contract of affiliation with the respondents, members of the Gosselin group, pursuant to which the Gosselin group operated a pharmacy under the Uniprix banner and concept, within premises owned by Uniprix. The contract provided a five-year term, and contained a renewal clause that required the Gosselin group to notify Uniprix of its intention to renew or not renew the contract of affiliation six months before the expiration of the term, failing which the contract was deemed to be renewed for an additional five years. The express terms of the renewal clause did not confer upon Uniprix any role in the decision to end or renew the affiliation, and Uniprix could only terminate the contract with cause in accordance with its contractual termination rights. Therefore, unless the Gosselin group elected not to renew the term of the contract by giving the required notice to Uniprix, the contract of affiliation could potentially remain in force perpetually, particularly given that the contract did not limit the number of times it could be so renewed.

In fact, the contract had already been renewed twice, both in 2003 and 2008, as a result of the absence of any notice of non-renewal by the Gosselin group. When the second renewal term was nearing expiration, Uniprix sent a notice to the Gosselin group stating that it had decided not to renew the contract of affiliation a third time.

The Gosselin group instituted proceedings contesting the validity of Uniprix's non-renewal notice, arguing that the renewal option could only be exercised by the Gosselin Group, and filed a motion for declaratory judgment to the effect that Uniprix remained bound by the contract of affiliation, and requested the issuance of a permanent injunction to compel Uniprix to comply with the contract.


The Superior Court agreed with the Gosselin group,2 holding that the renewal clause was clear and unambiguous and that automatic renewal clauses under which unilateral renewal rights are granted in favour of one party are valid under Quebec civil law. The Superior Court also held that the renewal option in the case at hand could only be exercised by the Gosselin group. Therefore, without elaborating on the question of perpetual obligations in contracts, the Superior Court determined that Uniprix's notice of non-renewal was not valid. Uniprix appealed the decision before the Quebec Court of Appeal.

The majority of the Court of Appeal dismissed the appeal and upheld the Superior Court's judgment, finding that the renewal option could only be exercised by the Gosselin group and was valid despite the potentially unlimited number of renewals of the term of the contract, given that the term of the contract between Uniprix and the Gosselin group was to be automatically renewed unless the Gosselin group provided the required notice of its intention not to renew.

The majority further stated that perpetual obligations are perfectly enforceable under Quebec civil law, and emphasized that they failed to find any general prohibition against perpetual obligations in the Civil Code of Quebec.

Furthermore, the majority found that the fundamentals of Quebec's contract law would not be compromised by recognizing that perpetual obligations may flow from a contract, and placed emphasis on the fact that Uniprix was a sophisticated corporation and that its freedom was not significantly compromised by the perpetually renewable term of the contract of affiliation. The majority also stressed the importance of preserving the parties' contractual freedom where the law imposes no limitations, and clearly stated that perpetual obligations are enforceable.

Moreover, the majority found the contract of affiliation to be a fixed term contract, terminable in accordance with its provisions, as opposed to the dissenting judge, who was of the view that this type of the renewal clause had the effect of transforming the term from fixed to indeterminate, thereby concluding that the contract of affiliation could be terminated at will by either party upon providing reasonable notice to the other party. This determination by the majority of the Court of Appeal has important implications with respect to termination rights, given the previous uncertainty as to whether perpetually renewable contracts should be considered fixed term contracts or contracts with an indeterminate term for purposes of Quebec civil law.

The appeal was dismissed.


With this long-awaited decision, the Court of Appeal has clarified that perpetual renewal clauses are not prohibited in Quebec. Franchise and affiliate networks as well as banner associations will be required to respect renewal clauses in their agreements even where no strict time limits are provided, and courts will likely enforce such provisions even though they may lead to perpetual obligations.

This decision is a reminder of the importance of having clear renewal conditions and processes in place in the context of franchise, affiliate and banner association agreements: the notices and other formalities required for renewals, and the party or parties entitled to exercise renewal rights, should always be clearly described in the agreement.

Automatic renewal clauses would not typically be recommended for franchise, affiliate and banner networks, given that repeated renewals and/or perpetuity in such arrangements may be detrimental to a network insofar as they may limit the possibility for franchisors or banners to be responsive to changes in the market and evolving operational considerations.

Where automatic renewal provisions cannot be avoided, the renewal of an agreement should be expressly stated to be contingent upon the satisfaction of various conditions, such as the franchisee or affiliate not being in default under its current agreement, and the execution of the current form of agreement put forth by the franchisor or banner at the time of renewal.

In addition, renewal clauses should clearly provide the consequences of any failure to satisfy the prescribed renewal conditions, namely that the term of the agreement will terminate without any further right to renew.

Parties should take care to avoid drafting renewal clauses that may be exercised unilaterally by one party indefinitely. Among a variety of options, parties may limit the number of times an agreement may be renewed by one party or consider the possibility of allowing either party to end the relationship after a certain number of renewals by providing reasonable notice to the other, thereby allowing both parties the flexibility to eventually stop the renewal cycle if desired. Uniprix has further appealed the Court of Appeal's decision and was granted leave to appeal before the Supreme Court of Canada in May 2016. We will continue to monitor developments in this regard.


1 2015 QCCA 1427

2 Gestion Gosselin et Bérubé inc. c. Uniprix inc., 2013 QCCS 6251

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.