Executive Summary: Key Legal and Evidentiary Issues

• Privity of contract under article 1440 C.C.Q. barred a subcontractor's direct claim against a municipality with which it had no contract.
   
• Absence of a stipulation for the benefit of a third party in the general contractor's agreement with the City proved decisive.
   
• Guarantee and release requirements in the City's contract with the general contractor were found to protect only the City, not subcontractors.
   
• Extracontractual liability under article 1457 C.C.Q. was rejected because no allegations explained how the City's contractual breaches toward the general contractor amounted to fault toward the subcontractor.
   
• Bankruptcy of both the general contractor and its officer left the subcontractor without recourse against them.
   
• Rejection of the motion to dismiss was upheld because the appellant raised no reviewable error and simply repeated its arguments from the lower court.
   

Facts of the case

Excavation R. Toulouse & Fils inc. ("Excavation") appealed a November 25, 2025 judgment of the Court of Québec that granted a motion to dismiss brought by Ville de Windsor ("the City"). The underlying dispute arose after the City awarded a contract, following a call for tenders, to general contractor Excavation LJL inc. ("LJL") for the extension of a street. LJL subcontracted with Excavation for supply and transport of aggregate needed for the project. Excavation had no direct contract with the City, though it did notify the City of its subcontract with LJL. In February 2024, Excavation sued both LJL and the City for close to $57,000 in unpaid invoices, alleging the City was solidarily liable. LJL subsequently went bankrupt, as did Luc Comtois, an LJL officer who had personally guaranteed Excavation's contract as surety, leaving Excavation without a means of recovering from either.

Policy and legislative provisions at issue

Excavation's claim against the City rested on two alleged failures under the City's contract with LJL: first, that the City did not require LJL to provide a guarantee as called for under the tender terms, and second, that the City paid LJL without first obtaining releases from LJL's subcontractors, as the contract required. Excavation argued these omissions made the City solidarily responsible for the unpaid debt. The legal basis for dismissing this argument was article 1440 C.C.Q., which establishes that contracts generally produce effects only between the contracting parties. The judge also considered whether the City-LJL contract contained a stipulation for the benefit of a third party, and whether the City's conduct could constitute extracontractual fault under article 1457 C.C.Q.

Reasoning and analysis

The motion judge found no stipulation for the benefit of a third party existed in the City's agreement with LJL. Although that agreement required guarantees regarding the general contractor's obligations and releases from subcontractors before payment, the judge concluded these protections existed solely for the City's own benefit, not for subcontractors like Excavation. Subcontractors were expected to protect their own interests through their arrangements with the general contractor — which Excavation had attempted to do by securing a personal suretyship from LJL's officer, Luc Comtois, though this ultimately provided no recourse once he too became bankrupt. The Court of Appeal agreed that the City was contractually bound only to LJL, and that requiring it to also pay subcontractors directly, absent an obligation to do so, would risk double payment of the same debt. On the question of extracontractual fault, the panel found that even taking as true the allegation that the City breached its contract with LJL, Excavation's originating pleading failed to allege why such contractual breaches toward LJL would amount to an extracontractual fault specifically toward Excavation under article 1457 C.C.Q. Before the Court of Appeal, Excavation largely repeated the arguments it had made at first instance without identifying any reviewable error in the lower court's reasoning.

Ruling and overall outcome

The Court of Appeal dismissed Excavation's appeal, finding no error in the motion judge's application of the principle of privity of contract or in his conclusion that no extracontractual fault had been properly alleged against the City. Ville de Windsor was the successful party, and the Court ordered that the appeal be dismissed with legal costs, though no specific dollar amount for those costs was stated in the judgment.