In Pavage Wemindji Inc. v. Compagnie de Construction et de Développement crie ltée, the Quebec Superior Court emphasized that a valid notice of default (mise en demeure) is not just a formality—it’s a precondition to exercising remedies like contract termination in many cases under Quebec civil law.
The Decision
The plaintiff, Pavage Wemindji Inc. (“Wemindji”), a paving subcontractor on a construction project, filed a lawsuit against the general contractor, La Compagnie de Construction et de Développement Crie ltée (“CCDC”), and its surety, seeking payment of a contractual balance of $102,641.11. In response, CCDC filed a cross-application claiming $577,619.13 from Wemindji for work not performed by the latter. At the heart of the dispute was whether CCDC had lawfully terminated Wemindji’s sub-contract.
The Civil Code of Quebec provides that a prior formal notice is required to terminate a contract. The purpose of this requirement is to formally notify the debtor of the breach, to give them the opportunity to remedy the breach within a specified timeframe, and to inform them of the sanction that will be applied in the event of failure. The creditor bears the burden of proving that its formal notice complies with the requirements of the Civil Code of Quebec.
CCDC first argued that it had issued a formal notice to Wemindji through a letter dated September 23, 2021. The Court found, however, that the letter did not meet the essential requirements of a valid notice of default, as it failed to set a deadline for performance or clearly state the consequences of non-compliance. Merely attributing delays to Wemindji and indicating that any resulting costs would be borne by it was insufficient to constitute a proper formal notice.
The only clear indication of an intention to terminate the contract came when CCDC announced the unilateral termination of the contract on May 9, 2022. At that time, no deadline for performance was provided, as CCDC stated that it had already made its decision to terminate the contract. This letter, which was not sent prior to the termination, failed to meet the criteria of a formal notice.
CCDC further argued that Wemindji was in default by operation of law, on the basis that it had no intention of performing the work in accordance with the contractual requirements. The Court rejected this argument, emphasizing that default by operation of law is subject to strict conditions, including a clear and unequivocal indication that the debtor does not intend to fulfill its obligations. In this case, the evidence did not disclose any such intention on the part of Wemindji.
Given the absence of a formal notice meeting the requirements of the Civil Code of Quebec, the Court concluded that the termination was unilateral and without cause. Wemindji’s claim was granted, and CCDC’s cross-application was dismissed. As a result, the general contractor and its surety were solidarily liable to pay the contractual balance, with interest.
