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The Supreme court of Canada decides upon perpetual renewal clause

The Supreme Court of Canada recently pronounced itself regarding perpetual renewal clause. In the judgment Uniprix Inc. v. Gestion Gosselin et Bérubé Inc., the Court confirms that the clause planning a unilateral renewal of the affiliation between Uniprix and pharmacists Gosselin and Bérubé every 5 years is valid.

It is therefore the parties’ responsibility to pay special attention to renewal clause and termination of affiliation in franchises and affiliation contracts.

In the case at end, the parties signed a contract in 1998 planning an automatic unilateral renewal by the pharmacists every 5 years. In 2012, the pharmacists received a notification from Uniprix that the contract would not be renewed this time. Uniprix supported its decision by claiming that a perpetual effect contract would be contrary to public order in Quebec.

The Supreme court proceeds to review the contract’s clause to determine if the clause is clear and non-ambiguous. It deems it clear and confirms the parties’ intent, which was to let the choice of renewing the affiliation between the parties, to the pharmacists. The highest court notes that Uniprix could have included a similar clause allowing them to end the affiliation by sending a notice to the pharmacist. Also, the majority explained that this type of contract is not contrary to public order.

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