The province of Québec is an important market for consumer goods, products and services of all kinds, which makes it a premier destination for manufacturers. However, it is essential to underline that manufacturers in Québec are subject to a specific legislative framework that differs from that of other Canadian provinces. In this context, this article will address five key points manufacturers must keep in mind when conducting business in Québec, so as to adequately avoid and mitigate their commercial and legal risks.
1. Targeted purchasers
In Québec, the sale and distribution of goods and services is generally governed by the Civil Code of Québec ("CCQ"). There is also a specific law, the Consumer Protection Act ("CPA"), which especially applies to contracts for goods or services entered into between consumers and merchants. The purchaser is considered as a consumer when he obtains goods or services for his own personal benefit - rather than for the purposes of his business - and under such conditions, the contract will be subject to the CPA.
The CPA is defined as a law of public order, which means that parties may not derogate from it. In an effort to guard against potential derogations, the CPA sets out numerous statutory protections, and, among others, prohibits certain contractual provisions, outlines the scope of legal and conventional warranties and defines illegal or misleading sales and advertising practices.
Manufacturers must therefore determine whether their goods and services will target consumers or businesses and take this into account when drafting contractual documents such as terms and conditions and user manuals, or when establishing sales practices and techniques.
2. Legal presumption of the existence of defect
Under Québec legislation regarding the liability of manufacturers, distributors and professional sellers, when a good perishes or deteriorates prematurely when compared to a good of a similar nature, a defect is presumed to have existed at the time the good was purchased.
Firstly, the purchaser must prove that the good has indeed perished or defaulted prematurely when compared to other similar goods. Once this has been established, it is presumed that a defect exists and affects the good in question. It is then up to the manufacturer to rebut this presumption of existence and to prove that the malfunction is not related to the good's manufacturing or raw materials. In doing so, the manufacturer may allege misuse or inadequate or insufficient maintenance of the good by the purchaser, or third party's faulty intervention on the good. Where applicable, the manufacturer may adduce the evidence by means of an independent technical expertise. If the manufacturer is unable to establish the cause of the default on the balance of probabilities, the latter will remain liable for the occurrence of the defect and damages stemming from it.
3. Legal presumption of knowledge of the defect
Once the manufacturer's liability is established, because of his special knowledge and expertise, the manufacturer faces a second legal presumption, namely that he is presumed to know about the good's defect at the time of its purchase. Based on this presumption of knowledge, the manufacturer will be held liable not only for damages related to the defective good, but also for any incidental damage arising from it, including loss of goods contained in a house or vehicle, loss of revenues or goodwill in the course of a business and various expenses incurred by the purchaser. Of note however, to be awarded, damages must necessarily be the direct and immediate consequence of the malfunction caused by the defect.
4. Legal and conventional warranties
The CCQ provides a basic legal warranty wherein sold goods must be free of latent defects, as well as a warranty by which the manufacturer attests the good to be free of any safety defect, such as, but not limited to, a lack of sufficient indications as to the risks and dangers involved with the good. Further to these common law warranties, the CPA also provides additional warranties pertaining to the use and reasonable durability of goods from which consumers may benefit.
All of these legal warranties supersede any conventional, commercial or extended warranty that may be provided to the purchaser by a manufacturer, distributor or professional seller, as the case may be. Consequently, it is important to review the applicable law provisions when assessing the scope, the applicability or the coverage of legal or conventional warranties in light of particular circumstances.
5. Limitation of liability clauses
Under applicable Québec law, by reason of the legal presumptions, exclusion or limitation of liability clauses included in a contract and pertaining to a manufacturer's liability with respect to the manufacturing defects and deficiencies of goods are unenforceable and may not be set up against the purchaser. In other words, a manufacturer cannot simply rely on a contractual clause in order to limit or exclude his liability for direct damages resulting from a manufacturing defect or other malfunction directly originating from the good it manufactured.
In light of the foregoing, it is imperative that manufacturers conducting business in Québec be well informed about the particularities of the statutory framework that exists in the province of Québec with respect to manufacturer's liability and the obligations that stem from it. This article provides a general and non-exhaustive overview of certain key elements of the law that applies in Québec, and is not to be taken as legal advice.