Executive Summary: Key Legal and Evidentiary Issues

• The Quebec Court of Appeal considered whether article 2109 of the Civil Code of Québec applied to a subcontract with a lump-sum price of $1,190,000.
   
• Ardec argued that the trial judge erred by relying on a provision it claimed had not been properly pleaded, though it did not press this point at the hearing.
   
• Central to the dispute was whether the subcontract contained an explicit clause permitting a reduction of the agreed price when the STM withdrew certain required work.
   
• A further issue involved the interpretation of a "pay-when-paid" clause and whether it created a suspensive term or a true condition under articles 1508 and 1510 C.C.Q.
   
• Ardec also contested the trial judge's dismissal of its claim for interest arising from Maxi's registration of a legal construction hypothec.
   
• Evidentiary findings addressed whether Maxi's registration of the hypothec was made in bad faith or was otherwise wrongful.
   

Facts of the case

Ardec Construction inc. was awarded a contract by the Société de transport de Montréal ("STM") on August 14, 2018 for elevator refurbishment work. On September 20, 2018, Ardec entered into a subcontract with Ascenseurs Maxi inc. ("Maxi") to carry out a substantial portion of that work. In 2021, Maxi sued Ardec for $404,082.33, representing the unpaid balance owing under the subcontract. Ardec contested the claim, arguing that some of the work in Maxi's bid had not been performed and invoking a pay-when-paid clause under which amounts were not payable until Ardec itself had been paid by the STM. Ardec also filed a cross-demand seeking $11,473.03 in interest on a sum withheld by the STM, which it attributed to Maxi's registration of a legal hypothec against the STM's building.

Policy and legislative provisions at issue

The subcontract set a lump-sum price of $1,190,000 plus taxes. Its terms required Maxi to "coordinate your work with the mechanical, structural, and architectural plans and comply with the general, supplementary, and special conditions of the STM contract." Regarding payment, the subcontract stated that amounts were payable "within 10 days of receipt of payment from the STM and in accordance with the STM's terms and the retentions provided for in the tender documents." Article 2109 C.C.Q. was central to the dispute, providing that under a lump-sum contract the client must pay the agreed price and cannot claim a price reduction on the basis that the work cost less than expected, absent an agreement to the contrary. Articles 1508 and 1510 C.C.Q., concerning obligations subject to a suspensive term, governed the interpretation of the pay-when-paid clause.

Reasoning and analysis

Because the subcontract contained no explicit clause allowing a price reduction if the STM later withdrew certain work, the Court of Appeal found that the trial judge correctly applied article 2109 C.C.Q. in treating the subcontract as an absolute lump-sum agreement. Drawing on prior Court of Appeal authority, the panel emphasized that parties to a lump-sum contract remain bound by the agreed price unless they have expressly provided for adjustment mechanisms. On the pay-when-paid clause, the Court agreed that the obligation was a suspensive term rather than a condition, and that Ardec and the STM's own conduct had made the anticipated event—the STM's payment—effectively impossible, causing the obligation to Maxi to become due regardless. Finally, on the hypothec issue, the Court found that although the trial judge's reasons were brief, the evidence did not establish that Maxi's registration was made in bad faith, was based on false statements, or was intended as an intimidation tactic, and therefore did not amount to a fault.

Ruling and overall outcome

The Court of Appeal dismissed Ardec's appeal in its entirety, upholding each of the trial judge's findings on the application of article 2109 C.C.Q., the pay-when-paid clause, and the hypothec claim. As a result, the underlying trial judgment in favour of Maxi, ordering Ardec to pay $319,894.82, stands undisturbed. Ardec was ordered to pay with costs.