On September 19, 2012, the Court of Appeal of Québec ruled on a dispute between Bombardier Recreational Products Inc. (BRP) and its former dealer, Christian Moto Sport Inc. (CMS). The court was unanimous in its decision to set aside the trial judgment and concluded that BRP had not acted abusively when it did not renew its dealership agreement with CMS upon expiry.
Believing it had suffered prejudice, CMS sued BRP for $2,184,308.20 in damages. The Superior Court allowed the action in part, and awarded CMS $526,054.68 in damages and $75,164.89 in expert fees.
The trial judge concluded that BRP’s decision to send a notice of non-renewal was not abusive. Indeed, the decision was based on reasonable business grounds and the notice given was sufficient. Even so, the judge concluded that BRP had an obligation to give CMS a second chance when it had offered to “[TRANSLATION] fall in line” and transfer the interest it had in its Yamaha dealership.
The Court of Appeal allowed the appeal and dismissed CMS’s action, with costs.
BRP v. CMS is an important decision in terms of contractual interpretation, specifically the non-renewal of dealership agreements. The case distinguishes between termination with cause during a contract period, which must have default as grounds, and the expiry of a contract, which requires nothing more than reasonable notice. The ruling confirms that when acting within the limits of good faith, a manufacturer is under no legal obligation to justify its decision not to renew a fixed-term contract. What is more, if a manufacturer does choose to justify its decision to terminate, the dealer is not entitled to perpetual contractual relations solely because it promises to mend its ways, thus placing itself in a position where it cannot be accused of default.
Martin Sheehan and Noah Boudreau, both from Fasken Martineau’s litigation group, have counselled BRP in this matter.
Bombardier Produits récréatifs inc. v. Christian Moto Sport inc., 2012 QCCA (200-09-007312-116) (available in French only).