A Commentary on Recent Legal Developments by the Opinions Group of McCarthy Tétrault LLP
Under the law of Quebec, article 2884 C.C.Q. prohibits the modification by contract of the prescriptive or limitations period provided by law. The prohibition applies to all contracts including commercial or business contracts. By contrast, Ontario law permits the modification of limitation periods in business agreements.
In Construction Infrabec Inc. v. Paul Savard, Entrepreneur électricien Inc. 2012 QCCA 2304, the Quebec Court of Appeal has confirmed that a notice requirement with a specified delay as a pre-condition to a contractual claim is not, in principle, a modification to the prescriptive period under Quebec law.
In the instant case, the fixed-price construction agreements with the Quebec Minister of Transport permitted contractors to claim additional funds from the Minister by sending various notices of claim within specified delays. The contract terms stated that the absence of a proper notice constituted renunciation to the claim. It was clear that the contract provisions dealt with a non-judicial claims process. The litigation arose as a result of various claims made by a subcontractor against its contractor and by the contractor against the Quebec Government. A defence raised against these claims was non-compliance with the notice requirements. The counter argument to this defence was that the notice requirements constituted a prohibited modification to the prescriptive period established under the law of Quebec.
The Quebec Court of Appeal stated that the notice provisions could not be characterized as a modification to the prescriptive period because they did not impose a delay that caused forfeiture or extinction of the claim. Rather, the process for submitting a claim, including the notice provisions, permitted the parties to renegotiate the price which would not otherwise have been possible under a fixed-price agreement. The notice provisions constituted a formality and a pre-condition which, if fulfilled, crystalized the claim against the Minister of Transport which could then be pursued before the courts. In other words, prior to fulfilling the notice provisions, there was no claim and the prescriptive period had not yet begun. Accordingly, the notice requirements could not be viewed as a modification to the prescriptive period established by law.
The decision in Construction Infrabec is important for several reasons. First, it recognized the distinction between a formal notice requirement as a pre-condition for a claim or cause of action and a prescriptive period. Quebec case law has previously recognized that a prior notice requirement in bank account verification agreements, for example, is valid as a pre-condition to a claim against the bank.
The validity of a prior notice requirement was obliquely recognized in Doré v. Verdun (City) [1997] 2 S.C.R. 862, in the context of interpreting article 2930 C.C.Q., which states that a prior notice requirement or delay (shorter than the prescriptive period) for instituting a personal injury claim cannot frustrate or "hinder" the prescriptive period established by law. The Doré decision held that non-fulfilment of such a notice requirement in a municipal statute did not extinguish the claim because to do so would cause it to "hinder" prescription contrary to article 2930 C.C.Q. The court rejected an argument that the notice requirement was merely a pre-condition to the claim. Nonetheless, the Supreme Court implied that a prior notice requirement would be valid for non-personal injury claims, without addressing the impact of article 2884 C.C.Q.
As a result of the Construction Infrabec decision, it appears that Quebec law permits the parties to a contract to agree that a timely notice must be given to create a claim or cause of action, in default of which the potential claim is abandoned and the debtor is released from liability. While a prior notice requirement might be useful in commercial agreements to attenuate the prohibition against modifying the prescriptive period in Quebec, caution is advised. The Infrabec decision arose in the context of a public call for tenders. The prior notice requirement was expressly held to benefit both parties to the contract. The potential claim was an exception to the rules governing a fixed price building contract by permitting a claim where it would otherwise not be available. The process involved a notice of intention to file a claim and notice of a non-judicial claim. The delay for the latter notice was linked to the ability of the claimant to calculate the claim. Further, the Court of Appeal did not consider the implications of the Doré decision.
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