Shareholder disputes can occur in any company, causing tension, disruption, and potential harm to the company’s operations. At La Boîte Juridique, we understand the importance of addressing them early. With our expertise in business law and dispute resolution, we offer tailored solutions to help companies effectively navigate shareholder issues.
These disputes can stem from various sources, whether they arise from disagreements, disputes over the future direction of the company, financial matters or decision-making authority. At La Boîte Juridique, we carefully analyze the underlying causes of the dispute and develop strategies to address the issues in order to propose solutions beneficial to all parties.
Navigating the legal framework surrounding shareholder disputes requires specialized knowledge and expertise. Our team of corporate and commercial law experts enables us to provide relevant advice and effective representation throughout the dispute resolution process. Whether you’re facing breaches of fiduciary duty or governance issues, we have the experience and resources necessary to protect our clients’ interests.
For over 30 years, we have recognized that each shareholder dispute is unique, requiring a personalized approach. Hence, we develop multi-dimensional strategies to identify the source of the conflict and apply the appropriate solution to quickly resolve the dispute while preserving business relationships and minimizing disruptions in operations.
Shareholders have rights that deserve protection under the law. Whether you’re a majority shareholder seeking to enforce your rights or a minority shareholder facing oppression or exclusion, we are here to advocate on your behalf. We work tirelessly to safeguard our client’s interests and ensure that their voices are heard.
WARNING: The information contained in this article, while of a legal nature, does not constitute legal advice. It is recommended to consult with a professional for advice that will address your specific situation.
Dani Ann Robichaud is the trailblazer behind La Boite Juridique, a law firm that bucks tradition to provide unmatched legal support to small and medium-sized business enterprises.
It’s her dedication to upholding the essence of the small business experience that has set her apart in the legal realm, and she comes by it honestly. Growing up in the small town of Winchester, Dani Ann was immersed in the life of local businesses, including her father’s car dealership, from the very beginning. After high school, which she completed in Rigaud, QC, she came to Ottawa to study business before entering Law School–a true culture shock for the once-unilingual Robichaud.
Initially, the budding lawyer aimed to launch her career in a large corporate firm in Toronto. But life took an unexpected turn when she arrived in Quebec for a six-month articling requirement. In that pivotal year, she met her future husband, and the recession reshaped the legal landscape for new lawyers so significantly, that Dani Ann decided to lay down roots and establish her law firm in Gatineau.
It was an unusual start for a new lawyer, but Dani Ann has made a career out of prioritizing the unconventional. At La Boîte Juridique, hierarchy doesn’t stifle ideas; instead, the firm empowers every team member, and competition takes a backseat to collaboration. The firm’s philosophy centers on the client belonging to the firm, not just the lawyer. They employ a piggyback system, ensuring two specialists in each area of law, putting the client’s needs above all.
For nearly three decades, Dani Ann has been a bilingual advocate, championing small and medium-sized businesses in Ottawa/Gatineau. She’s passionate about preserving the French language in Ontario and bridging the gap between Ottawa and Gatineau.
In 2024, her firm will celebrate three decades of growth. “It’s not the firm’s size but the richness of experiences and relationships that has defined our success,” the charming, affable lawyer reflects with a smile. Her message for business owners on navigating the legal landscape? “Don’t be afraid of the boutique firms, they will be everything you are looking for, because they truly know and understand you. For smaller firms, it’s a deliberate decision to stay small. We want that one-on-one relationship with our clients. It’s intentional.”
If you are unaware that the second phase of an amendment to Bill 25 comes into effect in September, you are not alone. However, this change, and the one in the following phase, could greatly impact you!
In Quebec, Bill 25 essentially focuses on the protection of personal information. It’s not a recent development, with its first version dating back to 1993. The Bill has undergone some amendments, notably in 2001 and 2006, but these changes and their application went largely unnoticed by most entrepreneurs, mainly due to a lack of information. However, three new amendments are changing the landscape.
“The first phase, which came into effect in September 2022, requires every entrepreneur to appoint a personal information protection officer,” says lawyer Dani Ann Robichaud. “This officer must report any incidents related to citizens’ personal data to the government.”
Tight Control
In fact, the company must establish a policy outlining the practices it adopts to govern personal information and ensure its protection. “This process will remain in effect throughout the life cycle of the collected information, and the company must be able to address complaints or requests for information related to the personal information it holds,” adds Robichaud.
In the second phase, the entrepreneur will have to evaluate privacy factors for employees, customers, and suppliers based on its methods of collecting and using information (subscriptions, website, sharing, and destruction of information).
“Thirdly, in collaboration with the person responsible for personal information protection, the company must ensure regular updates to its database. The Bill 25 provides for a right to be forgotten, stating that after a certain time, data must be destroyed,” she concludes.
Questions
The implementation of these changes and the application of Bill 25 are not without raising questions:
Does the law aim to hold an employee personally accountable and subject to fines in case of non-application of personal information protection mechanisms?
Is the collection of information to establish a customer profile (e.g., age, gender) subject to this control?
Is the collection of video images by a security camera system exempt from Bill 25?
If a convenience store owner, a victim of theft, transmits images of the crime to the police without a warrant, does he commit an offense? Does he obstruct police work if he refuses to do so under Bill 25?
Does the government have the means to achieve its ambitions? Will it operate based on complaints or audits?
Uncertainty
Surprisingly, Bill 25 was not invoked by politicians during the Desjardins or Facebook-Cambridge Analytica scandals. Moreover, how is the sending of personal data to servers outside Quebec handled? Information online regarding the three phases of amendments from 2022 to 2024 is practically nonexistent. However, the government would benefit from publicizing the application of these amendments to allow entrepreneurs to comply. Note that a non-compliant company could face a fine of $10 million or up to 2% of its international revenue…
ADVISORY BOX
The establishment of a policy regarding the management and disposal of personal information should be undertaken as soon as possible, but with caution. From the collection of information to handling complaints, your company must be able to demonstrate that it acts diligently and efficiently in managing this type of information. An advisor from La Boîte Juridique can assist you in developing a plan that incorporates best practices, thus helping you avoid unpleasant surprises…
WARNING: The information contained in this article, while of a legal nature, does not constitute legal advice. It is recommended to consult with a professional for advice that will address your specific situation.
Since last January, employers in Quebec must better support pregnant women in the workplace. Until 2022, the issuance of a reassignment or preventive withdrawal certificate was left to the discretion of a medical authority (doctor or specialized nurse practitioner). However, the legislator now requires doctors to refer to a protocol (prepared by the National Public Health Directorate) detailing the risk factors related to the employee’s work and that may require reassignment or complete withdrawal before childbirth.
Gisèle, 41, works in a restaurant. Her job requires her to stand for several hours, occasionally lift heavy boxes, and be exposed to viruses carried by customers. Due to her age, her pregnancy is more at risk, but her employer believes she can continue working by lightening her tasks. Formerly, the decision essentially rested with the doctor, based on the working conditions reported by the patient. Not anymore.
Objectification of Standards
“From now on, the employer will have to know and develop a plan establishing the risks associated with each task within his company,” explains lawyer Dani Ann Robichaud. “The government of Quebec wants to standardize eligibility criteria based on the medical-environmental context and create a more objective framework.”
Thus, it goes without saying that the criteria will vary from one environment to another. A pregnant woman working with chemicals in a factory faces a different type of danger than a nurse in a hospital or an office secretary. “The new criteria will not prevent an employer from taking voluntary withdrawal measures more quickly if that is what he desires,” says the lawyer. “Most large companies have already defined the measures to be applied, but this is not always the case in medium and small businesses.”
Who Decides?
It is the Director of Public Health who will establish the general outlines of the protocols for each field; however, employers will have duties to perform: “Each company must assess the dangers of the work environment, whether a pregnant woman is employed or not,” emphasizes Me Robichaud. “At the time of pregnancy, the doctor, after consulting with the DSNP, will have a precise picture of the work environment to request the reassignment or withdrawal of the patient.”
But what happens if the targeted employee moves from her $40-an-hour job to another one paid $20 an hour? “A subsidy program will allow the employer to bridge the salary gap between the two positions. The employee will have no financial impact due to her reassignment. If preventive withdrawal is necessary, the employer will fully bear the cost for the first five days; the next 14 days will be covered at 90% by the employer, who can obtain reimbursement if requested from the state. After this period, CNESST takes over from the employer,” says the jurist.
The doctor’s report is given to the employee and the employer; the latter can appeal the decision if he believes it is incorrect.
Exclusions
By imposing the reform of its policy on the reassignment and preventive withdrawal of pregnant women, the Quebec government has nevertheless recognized that standardizing eligibility criteria does not allow the inclusion of categories of employees who are not entitled. Among these are self-employed workers, Quebec residents working outside Quebec, employers established outside the province, as well as jobs falling under federal jurisdiction. Participants in Canadian and Quebec government programs are also excluded if they are not considered workers under the law (employment or study contract).
ADVISORY BOX
It is desirable that the analysis of the degree of danger in the workplace is clear and available to the Director of Public Health. Your lawyer can assist you in identifying physical risks, working in collaboration with the person responsible for health and safety to develop and implement an appropriate protocol. He/She can visit the workplace to assess high-risk areas. Just like a fire drill, it is important to regularly evaluate different work protocols to update them and not wait until facing a crisis to think about them. A clear communication channel between the lawyer and the employer is the best guarantee of safety that you can provide for yourself and your employees.
WARNING: The information contained in this article, while of a legal nature, does not constitute legal advice. It is recommended to consult with a professional for advice that will address your specific situation.
Effective at the beginning of last summer in Quebec, Bill 96 will have a significant impact on the language of business. In an effort to slow down the erosion of French in Quebec, the government is making changes that will affect a large number of SMEs.
The Bill 96 includes elements that came into effect in 2022, while others will take effect in June of this year, and a final part in 2025,” explains Me Dani Ann Robichaud of La Boîte Juridique. “Overall, Bill 96 promotes French in signage, packaging, and products sold in the province.”
Barely enacted, already contested
However, the imposition of the new law is not without some resistance and has a broader impact than the law suggests. Articles 5 and 119, in particular, were challenged in court, and their application was suspended even before they came into force.
“These articles stipulate that any legal entity addressing the Quebec courts must, at the risk of having their proceedings rejected, produce an official translation into French of any legal document written in another language, including English, for it to be recognized,” says Me Robichaud. If the articles of Bill 96 presently under suspension were to be deemed valid, “A contract drafted in English could not be validly submitted to support a claim for its enforcement without a translation prepared by an accredited translator accompanying the original. One can imagine the consequences, not to mention the additional costs and delays that such a measure will impose on businesses.”
Furthermore, in a recent decision, the Honorable Judge Corriveau justified the suspension of these provisions by specifying that, as drafted, there appeared to be a violation of the Constitution Act, 1867, allowing access to the courts in either French or English. It will then be necessary to wait for the adjudication on the merits to know the fate of these provisions of the Law.
Broad scope
Even more worrisome for SMEs is the broad scope of all the requirements of Bill 96. Starting in June 2023, an adhesion contract cannot be presented for signature in English without first providing the French version and obtaining the other signatory’s consent to conclude it in English. In any case, it will not be recommended for legal entities in the event the court upholds the legality of the aforementioned articles, as they will have to produce a translated copy in French. What about the consent of the English-speaking unilingual consumer presented with a contract in French? To be seen!
But there’s more: starting in June 2025, a company can only display a business name in French, unless it has filed and obtained a trademark with the Registrar.
“The problem is that it generally takes three years to obtain a trademark; however, the new provision takes effect in two years. Companies that have not started their processes will run out of time,” warns the lawyer.
The offending company faces a fine of $3,000 to $30,000 for a first offense, $6,000 to $60,000 for a second offense, and $9,000 to $90,000 for subsequent offenses; “And this, for each day of the offense,” she says.
Caution
It is difficult to know how long the Superior Court will take to render a decision on the validity of the provisions requiring legal documents to be translated into French as a condition for appearing before the Quebec courts. One thing is certain, these new obligations imposed on Quebec businesses are burdensome and bring their share of additional costs, difficulties, and complexity to SME executives and operators, casting doubt on the justification of the means undertaken.
Whether other provisions of Bill 96 will be contested in court remains to be seen, as the law is new, and its impact is still unknown. However, it is less likely that the Court will invalidate the rules regarding French-only signage, products, and packaging. Some of these provisions already have their roots in the Charter of the French Language.
ADVISORY BOX
It appears clear that Bill 96 will have a more significant impact on SMEs than on large chains that already have registered trademarks. This is not always the case for boutiques, restaurants, and service businesses. If the existence and notoriety of the business name were sufficient in the past, it may no longer be the case in 2025. Our legal advisors can guide you in preparing for the new provisions set to take effect in June 2023 and 2025.
WARNING: The information contained in this article, while of a legal nature, does not constitute legal advice. It is recommended to consult with a professional for advice that will address your specific situation.
In Quebec, the new obligations to improve business transparency come into effect on March 31, 2023. You will be required to provide this information to the Registrar of Companies starting from that date.
While the exact justification for this new measure may not be clear yet, the Registrar of Companies indicates that it is essential in the fight against fraud and tax evasion. Here are the elements that will be subject to mandatory disclosure:
Who is the Registrar of Companies?
The organization, as its name suggests, is mandated to maintain a register displaying all businesses operating legally in its territory. It is also committed to acting in a way that increases transparency and accountability in domestic and international operations.
Declaring Ultimate Beneficial Owners
Certain companies covered by the Business Corporations Act must declare to the Registrar of Companies information about their ultimate beneficial owners, such as their name, residence, and date of birth.
Providing Copies of Identification Documents
Companies will need to provide a copy of an identification document for the current directors declared in the business registry as proof of their identity. Moreover, they must declare the date of birth of any individual listed in the registry, along with the home address in the case of a natural person. However, it will be allowed to declare the professional address of the individual listed in the registry so that their home address is not accessible to the business registry.
Upon the entry into force of this law, it will be possible to conduct a search using the name and first name of a natural person in the business registry to find out who is associated with a business. However, certain personal information (e.g., date of birth) cannot be part of such a search.
It should be noted that any company with a non-voting shareholder but with influential powers over operations will have to disclose the identity of such a shareholder. This may pose a problem in the case of an investor who wishes to remain discreet.
March 31, really?
This measure is not entirely new; it was supposed to come into effect in 2021, but it seems that the government’s administrative apparatus was not ready to accommodate the integration of this information. Furthermore, the measure raises many questions and reluctance among the public, especially among business people, and there is a desire for its entry into force to be postponed again.
Pushing Investment Elsewhere?
The relevance of the new measure is in question. The current law does not prohibit an entrepreneur from investing in another business, without voting rights, while preserving certain powers in management to protect their investment. Some individuals, for entirely legitimate reasons, want to keep their involvement discreet; they are usually referred to as “Angel Funds,” “Love Money,” or “Silent Partners” because they wish to support start-up or struggling businesses while maintaining anonymity from the public, without seeking to evade their tax responsibilities.
In an economic climate where entrepreneurship is necessary to grow our economy and the collective wealth of society, such a measure could hinder this objective. Such an investor might be tempted to invest in companies operating elsewhere where this measure does not exist.
While attempts are made to justify this measure by invoking the need for transparency, these pieces of information are already disclosed to potential buyers in the context of business transactions. So, besides the desire to reduce tax evasion, it is challenging to see who will truly benefit from the new measure, and there are other ways to address this issue.
ADVISORY BOX
Let’s hope that the legislator modifies its requirements to avoid unduly harming investors who, with the risks they entail, choose to invest in start-up or restructuring companies. The legal advisors at La Boite Juridique can help you identify possible alternatives or, if necessary, gather and declare the relevant information.
WARNING: The information contained in this article, while of a legal nature, does not constitute legal advice. It is recommended to consult with a professional for advice that will address your specific situation.
Your company provides services to a client related to one of their assets, and the client refuses or is unable to pay. Under what circumstances does the right to retain their property until full payment of the debt arise?
The law provides that a creditor may, if certain conditions are met, retain the property of their client if the client fails to fully pay their invoice at the end of the contract. However, it’s essential to note that retaining is not the same as seizing. For example, a mechanic cannot decide to retain and sell a vehicle for which services have not been paid.
The 5 conditions for the right of retention to apply
According to legal precedent, the following five conditions must be met for the retention of property to be legal.
The contract must be valid. The creditor should not have carried out work beyond what was agreed upon with the debtor.
The property must have been handed over to the creditor in the course of contract execution.
The debtor must be the owner of the property or the representative of the company that owns it. There is an exception when the debtor legally possesses the property, such as being a car lessee.
There must be a connection between the debt and the property. For example, a mechanic cannot retain a customer’s computer if the debt is related to repairs made on their vehicle.
The debt must be due and payable.
Although the Civil Code of Quebec is silent on this matter, it is recognized that the right of retention applies exclusively to movable property.
Other Limitations to the right of retention
Even when the conditions are met, a creditor must contend with additional limitations to ensure that the retention of the property is legal.
The creditor must have fulfilled all their obligations under the contract. They cannot retain the property of a debtor awaiting payment for services not yet rendered.
Moreover, the creditor’s right of retention on a property extinguishes when they voluntarily return it to the debtor, unless there is an agreement that the debtor must return it to the creditor later. Without such an agreement, an unpaid mechanic for repairs on a vehicle cannot retain it for the debt, even if entrusted with the same vehicle for additional repairs.
The creditor must return the retained property when the debtor settles their invoice, even if the creditor believes they have a right to claim additional sums. It is worth noting that the creditor cannot claim storage fees for the period during which they have retained the property.
Furthermore, for the purposes of the Consumer Protection Act, a merchant must, if intending to retain an automobile, provide a written estimate to the consumer before carrying out any repairs. The merchant cannot retain the property if the price for their services exceeds the estimated amount, and the consumer pays that latter amount.
Additionally, a mechanic must be validly certified to legally retain a vehicle, according to the Garage Keepers Act.
On the other hand…
What to do if a creditor wrongfully retains your property or a property of your business? The owner has several remedies to rectify the situation, including payment under protest and reclaiming through a legal seizure.
Payment under protest involves settling an alleged debt by a creditor, with the right to claim reimbursement of the paid amount before the relevant authorities.
Reclamation through a legal seizure, which can be executed directly by bailiffs, allows for the seizure of the property before obtaining a court judgment. However, the property must be held by a custodian throughout the subsequent legal proceedings, ensuring the owner’s property is properly safeguarded.
In all cases, damages caused by the unjust retention of property can be claimed, along with any incurred bailiff fees. Moreover, unless due to force majeure, the withholder is accountable for damages caused to the property while in their possession.
BUSINESS LAW EXPERTS ADVISORY BOX
If a client defaults on payment for services rendered on a movable property, before returning the property to the client, make sure to consult with a legal professional to understand your rights, including the right to retain the said property. The legal professional can then assist or represent you in the debt recovery process. They can also guide you if, conversely, your property is wrongfully retained by someone who provided services to you.
WARNING: The information contained in this article, while of a legal nature, does not constitute legal advice. It is recommended to consult with a professional for advice that will address your specific situation.
In a special collaboration with Guylaine Ure – Sunbelt Canada
Whether it’s because retirement is on the horizon or you’re looking to embark on a new adventure, selling your business is a decision that requires careful consideration. Depending on your situation and the history of your business or office, two main options are available: selling assets or selling shares.
Selling shares applies to incorporated businesses with one or more shareholders, each holding subscribed shares derived from the corporation’s share capital. It is somewhat the soul of the business that is being parted with. On the other hand, selling assets is limited to what is often called the “business assets”: real estate, machinery, office equipment, vehicles, customer lists, etc. Both approaches come with their share of advantages and risks.
PART 1 – THE SELLER’S PERSPECTIVE
We will address the buyer’s perspective in the next edition in the context of acquiring a business. Let’s now focus on the seller’s perspective.
Selling Shares
“It’s usually the most interesting option for sellers in many respects,” says Guylaine Ure, a certified business broker at Sunbelt Canada. “This choice allows the business to continue as if nothing happened; only the shareholders change.”
The former shareholders will share the proceeds of the sale in the form of a capital gain. Since the current tax exemption limit on the gain is currently $892,000, sellers of shares in a taxable business often benefit from these proceeds, tax-free. Obviously, when selling shares, you are also selling the history of the business (reputation, order books, bidder privileges, recurring supply or procurement contracts).
A share sale promotes the continuity of the business. Moreover, it can attract investors who may want to be shareholders but not actively involved in the business. Opting for a share sale can also favor means of financing the acquisition of a business, especially if it has a certain notoriety or customer base, a history of good practices, and sound financial management.
Selling Assets
For an incorporated business, selling assets generally signals the end of operations.
Opting for the sale of assets as an approach to selling your business is a simpler exercise, requiring much less preparation, but it results in a generally less interesting net sale product considering the tax impact.
After the transaction, shareholders will essentially only have to manage the resulting asset, i.e., the sale price after the repayment of debts and taxes. They will only have to close their operations, terminate the lease, close their employer and sales tax accounts, etc. After that, they will only manage a bank account. In such a case, shareholders will share the net proceeds in the form of dividends paid in one or more installments over time, taxable again. Both approaches come with their share of advantages and risks.
A share sale requires preparation
Those who have done it will tell you: that to sell your business (even an individual one), you need to plan in advance. Will it be a family takeover, one of your employees, or someone from outside?
“Some entrepreneurs know their operations inside out but have never taken the time to put the details on paper,” warns Ms. Ure. “In the case of a transition to a new buyer, will they have access to your processes, or… do they only exist in your memory? Are your books up to date? If you do your own bookkeeping, know that a financial institution, as part of financing, may require an accountant to produce them. On the other hand, selling assets requires much less preparation and planning. Finally, even individuals operating a sole proprietorship can benefit from this approach provided they incorporate at least two years before selling.
BUSINESS LAW EXPERTS ADVISORY BOX
In accounts receivable recovery, communication plays an essential role. An unpaid account is not necessarily a sign of bad intentions on the part of your client. Several reasons could explain a delay or a lack of payment. To understand the true reason, a call to your client can often help.
The objective you should keep in mind is to resolve the situation as quickly as possible and, whenever possible, to preserve the business relationship you have with your client, but not at the expense of your company’s finances.
In business, as elsewhere, it’s important to remember that… good accounts make good friends!
WARNING: The information contained in this article, while of a legal nature, does not constitute legal advice. It is recommended to consult with a professional for advice that will address your specific situation.
Accounts receivable management is a crucial function in any business. Neglecting its importance can have serious consequences on its finances.
Every business must have an effective accounts receivable tracking system. Beyond this, adopting good practices can facilitate the collection of amounts due and minimize the risks of them turning into bad debts.
Among the best practices, the agreement with your client must be clear and in writing. Whether it is a contract or a work order, all terms related to the work to be performed or the product to be delivered, the cost, payment, and interest in case of late payment should be detailed, and the document should be signed by the client.
If there is a legal recourse, the document signed by the parties can serve as evidence of the terms of the agreement. This is sometimes more challenging to demonstrate in the case of a verbal agreement.
“It is necessary to demonstrate that the client understood and accepted the terms of the agreement. However, this is not necessarily the case when these terms are only indicated at the bottom of an invoice, as they may not have received the client’s acceptance,” explains Mr. Robichaud.
Invoice
Once the work is completed or the product delivered, it is important to send your invoice to the client promptly. It should contain the information agreed upon with the client.
“A delay in sending the invoice may lead your client to believe that you do not attach importance to the payment deadline, and therefore, they will not be in a hurry to pay you,” Mr. Robichaud cites as an example.
In principle, your client should send you the payment within the prescribed deadlines. In practice, businesses usually require their accounts to be paid within 30 days of invoice issuance, but payment does not always happen within this timeframe. In such cases, a good practice is to send a statement or a reminder notice upon the due date.
You can also prominently note that the account is overdue and that settling it promptly is advisable to avoid late fees.
Demand for Payment
Have these efforts proved futile? While the desire is to preserve the relationship with the client, there are instances when it becomes necessary to send a demand for payment when the gentle approach does not work. Much more formal, this communicates to your client that legal proceedings could be initiated or that their credit could be affected if they do not settle their account.
It is advisable to entrust the drafting of this demand to a lawyer, even if only to demonstrate the seriousness of your intentions and your firm commitment to recovering what is owed to you.
Your Recourses
Still no payment? Among the options, two obvious choices are available: a non-judicial approach and a second one that requires legal recourse.
The non-judicial or informal approach involves seeking the assistance of a collection agency. The Consumer Protection Act governs the relationship between the agency, consumers, and clients, and the Office de la Protection du consommateur ensures its compliance.
“Before signing a contract with an agency, it is important to gather information and even have it reviewed by a lawyer. There are limits to what a collection agency can do with a debtor, and the fees can be significant,” Mr. Robichaud advises. Due to the collection fees charged, it is generally more advantageous to use their services when outstanding accounts are less than $2,000.
When the nature of the claim justifies resorting to the courts, you can address the regular courts, which will depend on the amount to be recovered. A lawyer can certainly assist you through the process, even if they do not represent you in court, as in the case of the Small Claims Court.
The Small Claims Division can hear your case if the amount at stake is $15,000 or less, and if your business has 10 employees or fewer. Otherwise, in the case of a corporation, it will be necessary to retain the services of a lawyer to represent you.Haut du formulaireHaut du formulaireHaut du formulaire
BUSINESS LAW EXPERTS ADVISORY BOX
In accounts receivable recovery, communication plays an essential role. An unpaid account is not necessarily a sign of bad intentions on the part of your client. Several reasons could explain a delay or a lack of payment. To understand the true reason, a call to your client can often help.
The objective you should keep in mind is to resolve the situation as quickly as possible and, whenever possible, to preserve the business relationship you have with your client, but not at the expense of your company’s finances.
In business, as elsewhere, it’s important to remember that… good accounts make good friends!
WARNING: The information contained in this article, while of a legal nature, does not constitute legal advice. It is recommended to consult with a professional for advice that will address your specific situation.
THE LEGALITY OF AN INCREASE IN THE AGREED-UPONPRICE IN REAL ESTATE LAW AND CONSTRUCTION LAW
Are you planning to construct a building or carry out renovations to your property, or on the contrary, are you a contractor operating in the construction or renovation field? During the execution of a contract, specific circumstances, such as a significant increase in material costs, may render the agreed-upon price non-representative of the work to be performed in the eyes of the contractor. Is it possible for the contractor to proportionally adjust the price in such a situation?
Mr Olivier Martineau from La Boîte Juridique specifies that it all depends on the agreement in place. “It cannot be emphasized enough that a clear and detailed written agreement is always better than a verbal contract, and it is when unforeseen events occur that this becomes apparent,” he highlights.
In the construction industry, there are mainly three methods of establishing the price of work. The price may be determined based on the work performed and adjusted on the spot according to any particular circumstances that may have arisen. Another method used by contractors is fixing a lump-sum price, meaning a fixed price established in advance. Another option is to provide the client with a detailed estimate of the cost of the work.
What happens when COVID comes into play and causes a surge in material costs?
The Civil Code of Quebec governs contracts, but its application regarding the “COVID effect,” which seems to be the cause of all woes for some time, raises certain legal questions.
In the case of a fixed-price contract, it will be difficult, if not impossible, for the contractor to increase the final price using COVID as justification, unless a clause allows it. The general principle is that the client pays the price established initially. However, a simple general clause allowing a price increase will not be sufficient. It must include certain criteria, such as conditions justifying the increase, and also set a ceiling for how far it can extend.
It is especially when the price of the work was estimated at the conclusion of the contract that certain questions may arise. The Civil Code of Quebec allows an increase in the estimated price in these cases when the contractor can justify the unforeseeability of the circumstances that caused it. The case law, equating this unforeseeability to force majeure, establishes the criteria for this justification. “It is the responsibility of the contractor to demonstrate the unforeseeability of the cause of the price increase and to unequivocally establish the circumstances under which it was impossible to foresee this increase — the criterion of unforeseeability is, therefore, the key,” explains Me Martineau.
COVID as Force Majeure
“The unpredictability of COVID could, depending on the circumstances, resemble force majeure. It is a case-by-case scenario. The date on which the agreement was reached would be decisive, and attributing a price increase to the COVID effect could carry more weight in the case of a contract concluded in March 2020 than in the case of a contract concluded in March 2021, after a year of the pandemic,” says the lawyer.
A practice that can help the contractor avoid such a situation of uncertainty is to anticipate, when preparing the estimate, an increase representing the trend followed by the increase in the cost of materials at the time of contract conclusion. The client can then choose to accept or reject the offered price, consenting to an adjustment of the work price based on the cost of materials. One could even include a maximum percentage increase in the event of a force majeure.
And for the sale of a new building
Regarding the sale agreement of a new building, the general rule provides that the agreed-upon price will be the price paid. However, a clause like the one described above for a fixed-price contract can be integrated into a sales agreement, allowing for an increase in the price, though not exempting the contractor from the obligation to justify such an increase.
At times, the contractor may attempt to raise the sale price without including a clause in the agreement. In such cases, the client must remain vigilant and not accept this increase for fear of seeing the building sold to a third party. Conversely, a contractor may face challenges in convincing the client to accept a price increase, even if it is legal. Nevertheless, there are remedies available to protect the rights of both parties.
BUSINESS LAW EXPERTS ADVISORY BOX
With the housing shortage and the impact of the pandemic on the cost of materials, there is an increase in litigious situations in real estate law and construction law. Be aware that a lawyer from La Boîte Juridique can advise you to prevent such situations or represent you if you have a right to assert. In terms of prevention, nothing beats a clear, comprehensive, and well-drafted contract. A lawyer can also guide you during the drafting or signing of a sales agreement or a renovation or construction contract.
WARNING: The information contained in this article, while of a legal nature, does not constitute legal advice. It is recommended to consult with a professional for advice that will address your specific situation.
