Executive Summary: Key Legal and Evidentiary Issues

• A design firm sought payment of a final invoice after a client terminated their renovation contract early.
   
• The client argued it owed nothing due to the firm's failure to design within the agreed budget.
   
• Correspondence between the parties showed the client repeatedly flagged that proposed costs far exceeded the confirmed $650,000–$750,000 range.
   
• Article 2129 of the Civil Code of Québec did not apply because the termination stemmed from the firm's contractual fault rather than a simple unilateral decision.
   
• Quantifying the client's damages required subtracting fees it would still have owed the firm from the amount it ultimately paid a replacement designer.
   
• Judgment favoured the client on both the firm's claim and its cross-demand, though only for a portion of the damages sought.
   

Facts of the case

Ruscio Studio inc. ("Ruscio"), a commercial interior design firm, was retained by 9472-9969 Québec inc. ("Orly"), operator of a jewellery store at Carrefour Laval, to renovate and expand its store. The parties' representatives, Robert Ruscio and Moshé Dayan, met in June 2023 and agreed on a five-phase scope of work for total fees of $42,000. The first three phases proceeded without difficulty, but the relationship broke down during Phase IV, which included sourcing a general contractor. Bids Ruscio obtained ranged from $1,151,607 to $1,388,600, far above the $650,000–$750,000 construction budget Mr. Dayan had confirmed. Despite weeks of cost-cutting efforts, the budget remained unworkable, and Ruscio announced a fee increase rather than resolving the overrun. On November 27, 2024, Mr. Dayan terminated the contract. Ruscio subsequently billed Orly $5,712.16 for Phase IV services it acknowledged had been rendered, seeking no compensation for the early termination itself. Orly, in turn, disputed the invoice and counterclaimed $15,000, asserting it had been forced to hire IDX Design to redo the work, ultimately paying IDX $22,351.50 to obtain plans achievable within a $600,000 budget.

Policy and legislative provisions at issue

Ruscio relied on article 2129 of the Civil Code of Québec, which entitles a service provider to be paid, on termination of a contract, for expenses incurred, work performed, and any goods supplied up to the date of termination. Orly countered that this provision did not govern the dispute, since it applies to unilateral terminations under articles 2125 and 2126 C.C.Q., not to terminations triggered by a contracting party's fault. For the latter, the general regime of contractual liability under articles 1590 and following C.C.Q. applies instead. The Court also considered articles 1607 and 1613 C.C.Q., which limit recoverable damages to those that are the immediate, direct, and foreseeable consequence of a fault, and article 1619 C.C.Q., which provides for an additional indemnity on sums owed.

Reasoning and analysis

The Court found the termination was not a simple unilateral decision by Mr. Dayan for personal reasons, but a direct consequence of Ruscio's failure to produce a design achievable within Orly's budget. Citing the Quebec Court of Appeal's decision in Gélinas v. LG Constructions TR inc., the Court distinguished unilateral termination under article 2129 C.C.Q. from termination-as-sanction for contractual fault under articles 1590 and following C.C.Q., concluding that the latter regime applied here. The evidence, including the parties' email exchanges, showed Mr. Dayan reacted promptly and consistently to the budget overruns and actively proposed cost-saving measures, while Ruscio continued proposing designs it could not deliver within the agreed budget and resisted redoing the work without additional charge. The Court noted that Ruscio, as the design expert, bore responsibility for either designing within budget or clearly advising Orly that the budget was unrealistic. Turning to damages, the Court limited Orly's recovery to the $15,000 ceiling it had accepted for Small Claims jurisdiction, rather than the higher amount actually paid to IDX Design. From that ceiling, the Court deducted the $10,700 in fees ($4,500 for Phase IV and $6,200 for Phase V) that Orly would still have owed Ruscio had the contract been properly performed, since those amounts were instead paid to IDX.

Ruling and overall outcome

The Court dismissed Ruscio's claim for its final invoice, finding the termination resulted from Ruscio's contractual fault rather than a simple unilateral termination under article 2129 C.C.Q. It partially granted Orly's cross-demand, awarding $4,300, plus interest at the legal rate and the additional indemnity under article 1619 C.C.Q. from July 29, 2025. Each party was ordered to bear its own legal costs.