Parties in Quebec may agree on a contractual mechanism even though its effects could be perpetual

Contracts — Construction and interpretation — General principles

Chain of pharmacies and its member pharmacists entered into contract of affiliation in 1998 for fixed term of five years — Contract contained automatic renewal clause, which was triggered twice, in 2003 and 2008 — In 2011, chain failed to convince member pharmacists to move into new premises — Chain then sent member pharmacists notice of non-renewal, purporting to terminate contract as of January 2013 — Member pharmacists brought action seeking declaration that contract had been renewed until January 2018 — Trial judge concluded that renewal clause was clear and allowed member pharmacist to automatically renew agreement every five years — Hence, trial judge declared that contract was renewed until January 2018, and chain appealed — Majority of Court of Appeal held that contract could be renewed automatically unless member pharmacists gave notice to contrary — Majority added that chain had not acted in good faith, which barred it from resiliating contract, and upheld trial judge's decision — Chain appealed to Supreme Court of Canada — Appeal dismissed — Relevant clause clearly provided that, should member pharmacists fail to send prescribed notice to chain, agreement would be deemed to have been renewed — Word "deemed" created absolute and irrebuttable presumption — Because member pharmacists actually sent no notice whatsoever, agreement was deemed to have been renewed for additional five-year term — To interpret relevant clause otherwise would be contrary to general scheme of contract of affiliation and to how it has been applied by parties — Further, nothing in Civil Code of Québec prohibited such contracts from having effects that could be perpetual — Therefore, trial judge made no palpable and overriding error in interpreting contract and no intervention was justified.