Canada: If Your Dealer Agreement Permits You To Terminate "Immediately" For Breach, Do So Promptly Or Risk Paying Damages For Breach Of Contract

Last Updated: March 8 2017
Article by W. Brad Hanna, FCIArb.

A recent decision of the BC Court of Appeal in Cellular Baby Cell Phones Accessories Specialists Ltd. v. Fido Solutions Inc.[1] provides important guidance to suppliers seeking to terminate dealer agreements pursuant to "immediate" termination for default clauses.  In short, the case finds that the failure by a supplier to promptly exercise such termination rights will itself constitute breach of contract by the supplier. The remainder of this bulletin summarizes the case and concludes with some important take-aways for suppliers.

The Facts in Cellular Baby

In 2003 the plaintiff, Cellular Baby, became an authorized dealer of Fido selling cellular phone products and wireless plans.  The parties entered into their third successive dealer agreement in 2008.  Cellular Baby operated 12 retail outlets in BC and Alberta, and was one of Fido's highest producing dealers.  In 2009, Cellular Baby accounted for 27% of Fido's total sales and was recognized by Fido for its high customer satisfaction ratings.

Like most dealer agreements, the 2008 agreement at issue in this case was prepared by the supplier (Fido) and its terms were not subject to negotiation.  The agreement was for a five-year term and provided that if the parties did not enter into a new agreement on the expiry of that term the agreement would continue month-to-month, subject to termination by either party on 30 days notice.  It also permitted Fido to unilaterally set quarterly sales quotas and contained a fairly standard provision stating that Fido "may immediately terminate" for several enumerated events of default, including the dealer's failure to meet sales quotas set by Fido in any three quarters of a calendar year. 

Although it had never failed to achieve its assigned quotas before, 2010 was a bad year for Cellular Baby – it did not meet its quarterly quotas at all in Alberta and also fell short in the first, second and fourth quarters in BC.  After each of those quarters, Fido sent Cellular Baby a perfunctory email noting its underachievement, but the emails did not suggest any remedial action or warn Cellular Baby that its dealer agreement was in jeopardy as a result.

By sometime in January, 2011, Fido knew it had the right to terminate the dealer agreement under the above-noted termination provision.  Rather than immediately terminating for cause, however, Fido internally analyzed the impact of terminating Cellular Baby to determine whether it could recapture the sales that would be lost from termination.  Fido waited until late September, 2011 (some eight to nine months after its right to "immediately terminate" crystallized) before sending its termination notice to Cellular Baby – a delay that came back to haunt Fido.

Cellular Baby sued Fido for improper termination of the agreement, seeking lost profits over the remaining term of the agreement as well as damages for the lost opportunity to sell the business as a going concern.  Fido counterclaimed for about $300,000 in unpaid inventory.  The trial judge held that Fido wrongfully terminated the agreement (because he found the obligation to terminate "immediately" required Fido to do so within a reasonable period of time, not eight to nine months later), but dismissed Cellular Baby's lost opportunity claim as being speculative and also held that Cellular Baby had failed to mitigate its losses.  In the end, the trial judge awarded Cellular Baby only nominal damages of $500.00, and allowed Fido's $300,000.00 counterclaim. 

Cellular Baby appealed the damages findings, and Fido cross-appealed the trial judge's findings that it had improperly terminated the agreement.

The BC Court of Appeal Decision

Although 2010 was a bad year for Cellular Baby, February of 2017 (when the BC Court of Appeal released its decision) proved to be a bad month for Fido.  The Court of Appeal upheld the trial judge's conclusion that Fido had improperly terminated the agreement, and increased the damages award in favour of Cellular Baby from $500.00 to a total of $2,184,000.00, plus legal costs and interest.

Fido's main argument on appeal was that the trial judge erred by holding it had wrongfully terminated the agreement when it failed to do so immediately upon learning of Cellular Baby's breach of the quota requirements.  Fido alleged that the trial judge misconstrued the import of the termination provision and argued that the words "may immediately terminate" gave it the right to terminate without notice or warning, but did not require it to do so immediately in the literal sense of the word. 

The Court of Appeal acknowledged that when construing a contractual provision courts must read the provision in light of the contract as a whole, and agreed with Fido's interpretation that the words "may immediately terminate" gave Fido the right to terminate without notice or warning if Cellular Baby committed any of the enumerated defaults.  In that respect, it found that the trial judge had erred.  But the Court of Appeal went on to conclude that the error was not fatal to the trial judge's conclusion that for Fido to lawfully terminate on the basis of this provision, it must still do so within a reasonable period of time.  The Court of Appeal agreed with the trial judge that, by waiting some eight to nine months in the circumstances before terminating, Fido had lost the right to terminate under this provision for Cellular Baby's default in 2010.

With respect to Cellular Baby's appeal on the question of damages, the Court of Appeal found that had the agreement run to the end of its term Cellular Baby would have had the right to sell its business as a going concern to a third party.  The trial judge was unable to conclude that the sale of the business was anything more than a possibility and speculation, and found that Cellular Baby failed to prove its losses on a balance of probabilities.  The Court of Appeal disagreed.

The Court of Appeal relied on earlier law which sets out the correct approach when assessing a loss of opportunity claim: if the plaintiff shows with some degree of certainty that a future opportunity was lost because of the defendant's breach, some damages should be awarded even if the plaintiff cannot prove the amount of loss with certainty.  The more certain the possibility of the loss, the greater the damages award.  And where the defendant's conduct caused the loss, any doubt should be resolved in favour of plaintiff. 

The Court of Appeal found that while it is impossible to say with certainty what would have happened, that uncertainty is properly dealt with by applying a modest deduction.  Because Cellular Baby previously had a buyer willing to purchase its business for about $2.1 m, was one of Fido's largest dealers in BC and had a profitable business, the court applied a modest deduction to account for the uncertainty and awarded it damages for this lost opportunity in the amount of $1,617,000 (plus lost profits and business losses that took the total award up to $2,184,000.00). 

Finally, the Court of Appeal also found the trial judge erred in concluding that Cellular Baby had not acted reasonably to mitigate its damages. Fido extended the termination date to give Cellular Baby some time to sell its business, but insisted that as a condition of any sale, it must release Fido of any liability from future claims.  Cellular Baby elected not to do so.  The Court of Appeal concluded that the trial judge erred in finding that Cellular Baby should have availed itself of this opportunity because the duty to mitigate does not require a party to release claims against a wrongdoer.  Accordingly, the Court of Appeal found that no amount should be deducted from the damages award on the basis that Cellular Baby failed to properly mitigate its damages.

Key Take-Aways For Suppliers

  1. If your dealer agreement permits you to terminate immediately for cause, do not delay in exercising that right.  The language of your dealer agreement, assuming it is a contract of adhesion like the one in this case, will be read strictly against you.  You must exercise the termination right within a reasonable amount of time.  While the case does not establish a bright line rule as to how much time you have (the length of time will depend on the circumstances in each case), if you delay for months you do so at your own peril.
  2. If your dealer shows with some degree of certainty that a future opportunity was lost due to your improper termination of its dealer agreement, the court will be inclined to award damages even if the dealer cannot prove the amount of loss with certainty.  Any uncertainty of outcome of a lost opportunity claim will be resolved against you.
  3. The duty to mitigate does not require a dealer to provide you with a general release releasing all claims against you.  The Court of Appeal specifically noted that it may have reached a different conclusion on the mitigation point had Fido not made the potential sale of Cellular Baby's business conditional on Cellular Baby giving it a release. 
  4. Be reasonable when setting sales quotas.  The trial judge reviewed Fido's practices in this regard and compared the quotas it set for Cellular Baby with those for other major dealers at the relevant time.  The trial judge found that Fido increased Cellular Baby's quotas in 2010 but reduced those of its other similar dealers without any reasonable explanation.  He therefore concluded that because Cellular Baby's quota was not reasonably set in 2010, it could not be said that Cellular Baby breached the agreement.  While the Court of Appeal did not address this issue given its finding that Fido failed to exercise its termination right within a reasonable time, suppliers should be mindful of the trial judge's findings - set reasonable quotas, and be prepared to explain how and why they are reasonable.
  5. Warn your dealer if its conduct may result in termination before exercising your termination right.  The trial judge found that Fido failed to act reasonably and in good faith by failing to: a)  respond and deal with some legitimate complaints Cellular Baby had raised; b) warn Cellular Baby that its dealer agreement was in jeopardy when it missed its quotas; and c) offer assistance to Cellular Baby to address the quota problems before terminating. While the Court of Appeal did not need address this point either, to defend against bad faith allegations suppliers should do all of the above before pulling the pin on a dealer.


[1] 2017 BCCA 50

The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.

© McMillan LLP 2017

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.

W. Brad Hanna, FCIArb.
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.