Commercial

Restrictive covenants are frequently included in contracts that govern business practices and relationships. They are intended to protect the legitimate interests of the parties, such as goodwill, confidential information, team stability and—more broadly—the value of a business.  That said, more often than not, restrictive covenants that apply to health care professionals  need to be modified. A so-called “professional-patient” relationship differs from an ordinary business relationship, as a clientele consisting of patients has its own distinct characteristics. Indeed, the Court of Appeal of Quebec has repeatedly reiterated that restrictive covenants—namely non-compete and/or non-solicitation clauses—cannot, directly or indirectly, compromise the continuity of care or restrict a patient’s free choice. Therefore, the analysis must extend beyond financial protection alone to include public order considerations relating to access to care and continuity of care.  The challenge thus lies in drafting clauses that are both useful and enforceable. This requires a focus on what actually needs to be protected, while avoiding restrictions that would dissuade a health care professional from continuing treatment or prevent patients from receiving care from their physician of choice.  The most common restrictive covenants  The purpose of a non-compete clause is to prevent individuals from engaging in competing activities after a contractual relationship has ended. With regard to employment, article 2089 of the Civil Code of Québec1 requires that the clause be limited as to time, place and type of employment, to what is necessary for the protection of the legitimate interests of the party in whose favour the “protection” is established.2   A non-solicitation clause does not necessarily target the practice of the profession as such, but rather actions intended to actively attract individuals or entities associated with the business, including patients, referrals or employees. Although it is often presented as less intrusive, it can nonetheless have effects comparable to those of a non-compete clause if it is worded so broadly that it effectively prevents a professional from seeing patients who wish to be under their care.  Unique characteristics of the health care sector: patients, continuity of care and public order  One particular restriction applies in the health care sector: a non-compete clause must neither treat patients as a commercial asset nor place the professional in a position of having to choose between: (i) complying with the clause; or (ii) ensuring the continuity of care required by a patient’s medical condition. Patients are not parties to the contract between the employer, the clinic or the purchaser and the health care professional, and are not considered objects in commerce.3 It is therefore risky to attempt to govern their conduct by way of a contract, as if they were parties to the agreement.4  It should be noted that this premise is considered when covenants are assessed.5 The law and various codes of ethics generally require professionals, in particular, not to “abandon” a patient, to ensure a secure transfer of records, and to uphold—within the limits of the regulatory framework—the patient’s freedom to choose their service provider.6 The contract, therefore, cannot be drafted as though the protection of goodwill alone justified restrictions that compromise continuity of care.  Jurisprudential insights from the Court of Appeal of Quebec  Where a health care professional practises at a clinic, a non-compete clause between the clinic and the professional must not prevent a patient from continuing to receive care from the professional of their choice should the patient-professional relationship be terminated. A clause that violates this rule is especially vulnerable to being deemed invalid if it directly or indirectly prohibits practitioners from treating or taking on patients connected to a clinic—particularly where it makes no exceptions for emergency care or the continuation of treatment.7 Thus, a clause that prohibits treating former patients of a clinic or accepting patients “originating” from it, with no exceptions—particularly regarding ongoing care—may exceed what is required to protect goodwill and may conflict with the continuity of care. Similarly, a non-solicitation clause that treats the mere act of responding to a patient’s request as solicitation may, in practice, turn a prohibition on solicitation into a prohibition on providing treatment,8 which should be avoided.  The issue does not lie solely in explicit prohibitions. It can also stem from a mechanism designed to deter professionals from accepting patients in order to avoid penalties. In this regard, a penalty clause triggered by the act of treating a patient may exert economic pressure that could affect the patient’s choice and the continuity of care, even if the provision does not expressly refer to the discontinuation of care.9  Professional context vs. commercial context  From a structuring perspective, one often useful approach is to draw a clear distinction between clinical practice and commercial involvement.10 A prohibition against providing clinical care is the measure that most directly affects the continuity of care, as it prevents the professional from providing care precisely when a patient wishes to continue treatment.11 The stronger the pre-existing therapeutic relationship and the longer the course of treatment, the greater the risk of hindering the patient’s freedom of choice and the continuity of care.12 In other words, discontinuing treatment is generally more problematic in long-term care (e.g., orthodontics, psychiatry) than in one-off procedures (e.g., dental cleanings). Where restrictive covenants result in the disruption of the continuity of care, their consequences are too serious to be left to the vagaries of the market.13   Conversely, certain restrictions relating to the leadership, management, operation or control of a competing business may sometimes be more justifiable where they protect a specific legitimate interest without actually preventing the continuity of care. While this approach does not ensure a clause’s validity, it does reduce the likelihood that the clause will be deemed invalid, provided that the clause is carefully worded in terms of time limit, scope and definition of protected activities, and that it accurately reflects what is actually observed in clinical practice.  Five recurring issues with drafting  Territory  The issue of territory continues to come up frequently as a point of contention. In health care, territory must be defined based on the actual service area and the legitimate interest to be protected, while considering the impact on access to care.14 A territory that is too big could mean less services,15 particularly in specialized fields, whereas a territory that is too small could render the clause commercially ineffective.16 It is also important to note that territorial scope must be assessed on a case-by-case basis. A standard clause provided by a recognized association may even be deemed ineffective if it does not reflect the legitimate interests of the business in question.17  That said, even in the absence of an established territory, a restrictive clause may be valid, provided that the target clientele is clearly defined.18   Time limit  The time limit must be clearly established and reasonable. A clause with no time limit—or one with an ambiguous start date—is particularly problematic.19 Even where the time limit has been clearly established, it must be based on a defensible business rationale and must not exceed what is necessary, especially where the restriction affects clinical practice rather than specific conduct.  Activities The definition of prohibited activities is often crucial. Broadly worded provisions—such as a general prohibition against providing “similar” services—become difficult to enforce without conflicting with clinical requirements.20 In practice, it is generally more prudent to focus on identifiable and verifiable conduct rather than prohibiting a physician from treating a patient who wishes to be under their care. Where treatment is ongoing, it may be necessary to include an explicit provision regarding continuity of care to reduce the likelihood that the clause will be deemed invalid.21  Non-solicitation clause  A non-solicitation clause requires a particularly careful definition of the concept of “solicitation”. A non-solicitation clause that would prevent a professional from earning a living would likely be deemed invalid and unreasonable.22 The recurring point of contention remains the distinction between actively and specifically trying to attract patients, and responding to a patient’s request to seek care from a particular professional. The degree of precision in targeting the clientele is also very important.   Penalty clause   The penalty clause must be handled with caution. In a health care context, the amount of a penalty or the form it will take can dissuade professionals from continuing treatment. Imposing a penalty simply for providing treatment—regardless of whether active solicitation or unfair conduct23 occurred—could be perceived as indirect coercion that infringes the patient’s freedom of choice.24 The penalty is more likely to fulfill its purpose when it targets specific and quantifiable acts, while remaining proportionate to the anticipated commercial prejudice.  It is also important to note that if any one of these analytical criteria is deemed unreasonable, that alone may be sufficient to render the restrictive covenant invalid in its entirety.25   Conclusion  The rulings of the Court of Appeal of Quebec26 underscore a crucial point, namely that the protection of goodwill or an investment, however legitimate it may be, cannot result in a restriction on a patient’s freedom of choice or in an infringement—indirect or otherwise—on the continuity of care. When drafting clauses, the soundest approach is generally to target conduct that is genuinely problematic from a business perspective—such as active solicitation, the use of confidential information and unfair competition—rather than imposing a general prohibition against treating patients.  Where more significant restrictions are being contemplated, distinguishing between clinical practice and commercial involvement may help reduce the likelihood that the clause will be found invalid, provided that it remains reasonable as to duration, territory and scope of activities, and that it is consistent with the clinical imperatives established by case law.  The content of this article is published for general information purposes only and should not be construed as constituting a legal opinion or legal advice. Be sure to contact a member of our team for advice specific to your situation.  CCQ-1991. Payette c. Guay inc., 2013 CSC 45, para. 61. Mirarchi c. Lussier, 2007 QCCA 284, para. 46. Mirarchi c. Lussier, para. 43. Mirarchi c. Lussier, 2007 QCCA 284, para. 27. Mirarchi c. Lussier, 2007 QCCA 284, para. 29-35. Mirarchi c. Lussier, 2007 QCCA 284, para. 50-53. Pitl c. Grégoire, 2018 QCCA 1879. Mirarchi c. Lussier, 2007 QCCA 284, para. 52. Mirarchi c. Lussier, 2007 QCCA 284, para. 35. Mirarchi c. Lussier, 2007 QCCA 284, para. 29. Mirarchi c. Lussier, 2007 QCCA 284, para. 49. Mirarchi c. Lussier, 2007 QCCA 284, para. 51. Gestion Philippe Girard inc. c. Clinique de réhabilitation prosthodontique de Québec inc., 2022 QCCA 1146, para. 103. Gestion Philippe Girard inc. c. Clinique de réhabilitation prosthodontique de Québec inc., 2022 QCCA 1146, para. 104. Pitl c. Grégoire, 2018 QCCA 1879, para. 60. Pitl c. Grégoire, 2018 QCCA 1879, para. 64-69. Services financiers Bertrand Lapointe inc. c. Groupes financiers Claude Grefford inc., 2026 QCCA 98, para. 9.; Payette c. Guay inc., 2013 CSC 45. Pitl c. Grégoire, 2018 QCCA 1879, para. 79. Gestion Philippe Girard inc. c. Clinique de réhabilitation prosthodontique de Québec inc., 2022 QCCA 1146, para. 102 and 104. Théberge c. Lévesque, 2007 QCCA 898, para. 52. Pitl c. Grégoire, 2018 QCCA 1879, para. 43. Théberge c. Lévesque, 2007 QCCA 898, para. 59. Théberge c. Lévesque, 2007 QCCA 898, para. 54. Pitl c. Grégoire, 2018 QCCA 1879, para. 70-71. and the Supreme Court of Canada

The Act to protect consumers against abusive practices in ticket reselling and online subscription renewal (“Law 10,” formerly Bill 10, “Bill 10”) was adopted on June 11, 2026, and assented to on June 12, 2026.   Law 10 is part of the legislature’s efforts to strengthen Quebec’s consumer protection regime. It will come into force on September 12, 2026.   However, certain provisions took effect as soon as June 12, 2026, in particular section 10, which provides for the addition of new section 272.1 to the Consumer Protection Act (“CPA”).  Some measures in Law 10 are aimed at commercial transparency and making the consumer experience more straightforward. Others, such as the introduction of the new section 272.1 of the CPA, are likely to substantially reconfigure consumer law in Quebec.  The Parliamentary Committee significantly amended Bill 10 during its detailed review on May 7, 2026. The most consequential amendment was making the new section 272.1 of the CPA “declaratory,” overriding the Court of Appeal’s interpretation in Union des consommateurs c. Air Canada, 2025 QCCA 480,1 currently under appeal before the Supreme Court of Canada.  Ticket reselling: stricter rules focused on disclosure  Law 10 introduces a structured regime for ticket resale platforms without prohibiting the business model. The focus is on the quality of information provided to consumers. These requirements will take effect on September 12, 2026.  The new provisions impose a transparency requirement from the moment consumers access a website and throughout the entire transaction process. They must be informed that they are using a resale platform—and not dealing directly with the original seller—and must be given clear information about the type of ticket, its original price and applicable terms and conditions.  With this provision, the legislature is requiring that prices be broken down rather than banning certain fees. The chosen model continues to allow commercial flexibility, provided that the price structure is fully disclosed.   Contracts involving sequential performance: tighter regulation of the contract lifecycle  Law 10 also introduces new requirements regarding contracts involving sequential performance, in particular online subscriptions. These requirements will take effect on September 12, 2026.  The law requires merchants to provide a cancellation mechanism that is not only accessible, but also designed not to create an undue obstacle. In addition, merchants are required to notify consumers before the end of a promotional period or before a new price takes effect.  Note: The requirement to provide notice before the end of a free or discounted period does not apply to contracts already in effect as of September 12, 2026.  These provisions reflect a desire to tighten control over the performance of contracts, rather than just their formation. For merchants, this means they need to review their digital interfaces and internal processes to ensure ongoing compliance.  Beyond technical adjustments, there is also a litigation risk, as these new obligations could serve as grounds for legal action under the CPA, especially when the cancellation mechanism is perceived as difficult or hard to access.  Clauses prohibiting consumer reviews  Law 10 also prohibits provisions that prevent consumers from publishing or communicating reviews of a good or service, or of the merchant’s conduct.  This prohibition took effect on June 12, 2026.  It aims to eradicate contractual practices that restrict consumers’ freedom of expression in the digital environment.  The decision in Union des consommateurs c. Air Canada, 2025 QCCA 480, and the new section 272.1 of the CPA  In its decision rendered on April 22, 2025, in Union des consommateurs c. Air Canada, the Court of Appeal reiterated that a merchant who advertises a partial price and then demands a higher price at the time of payment violates section 224 of the CPA, which requires that the advertised price reflect the total amount payable.  The Court acknowledged that a violation such as this may give rise to the remedies provided for in section 272 of the CPA, particularly because of the presumption of fraudulent effect2. It concluded that the practice of breaking down the price is likely to influence consumer behaviour and may, as such, trigger the application of the presumption.  However, the Court of Appeals refused to automatically award compensation equal to the difference between the advertised price and the price paid. It stressed that, despite the applicable presumption, the consumer must demonstrate quantifiable harm, in accordance with the general principles of civil law. It thus cast aside the notion that a violation of the CPA must automatically result in restitution.  The Court also pointed out that the remedies provided for in section 272 of the CPA are compensatory in nature and must not result in the consumer’s enrichment. It did, however, award $10 million in punitive damages for the conduct in question, deeming it vital to deter its repetition.  This decision aligns with the balance set out in Fortin c. Mazda Canada Inc., 2022 QCCA 6353 and other rulings, namely that the seriousness of violations of the CPA must be recognized, but damages must still be proven.  It is precisely this balance that the new section 272.1 of the CPA, as amended on May 7, 2026, calls into question.  In its final form, section 272.1 of the CPA provides that a merchant who demands payment of a sum in violation of the CPA must refund that sum, regardless of whether a service was provided in return.   What is crucial here, however, is the fact that the provision was made declaratory. By doing so, the legislature has reaffirmed what it considers to be the true state of the law, effectively overriding the Court of Appeal’s interpretation in Air Canada.  The legislature’s position directly challenges the conclusion that restitution is not automatic but contingent on proof of prejudice. The term “declaratory” paves the way for the immediate—or even retroactive—application of this remedy.  For merchants, the implications are considerable. Section 10, which adds section 272.1 to the CPA, came into force immediately on assent. As a result, it will likely—in some cases—nullify or render largely ineffective one of the main defences recognized by the Court of Appeal, namely the argument based on the absence of quantifiable prejudice.  The scope of the new section 272.1 of the CPA is even more impactful given that the appeal of the decision in Air Canada is currently pending before the Supreme Court of Canada, with leave having been granted on February 5, 2026. The legislature thus intervened even as the country’s highest court is set to rule on the scope of remedies under the CPA.  Conclusion   The adoption of Bill 10, and it subsequent assent, marks significant turning point for merchants subject to the Consumer Protection Act. The law will mainly come into force on September 12, 2026, but certain provisions, including the new article 272.1 of the CPA and the prohibition of certain clauses targeting consumer notices, came into force on June 12, 2026.  While the new rules governing the resale of tickets and contracts involving sequential performance primarily impose stricter operational requirements, the new section 272.1 of the CPA more directly affects the core of civil liability for merchants.  By casting the Court of Appeal’s approach in Air Canada aside, the legislature has established a more automatic restitution regime, which is likely to significantly heighten financial and litigation risks for merchants.  The progress of the case before the Supreme Court will need to be closely monitored, as the Court will be called upon to clarify the relationship between this legislative intervention and the principles applicable to remedies under the CPA.  In this context, businesses would be well advised to (i) assess the immediate impact of section 272.1 of the CPA on their pricing practices and the risks arising therefrom and (ii) review their business practices, transactional interfaces and contractual documentation by September 12, 2026, to anticipate the entry into force of the other provisions of Law 10.  If you have any questions or wish to discuss the impacts of Law 10 on your business, we invite you to contact members of Lavery’s commercial litigation team.  Takeaways  1. Entry into force: two dates to remember  Law 10 was adopted on June 11, 2026, and assented to on June 12, 2026 Entry into force of most provisions: September 12, 2026, but some measures have already been in effect since June 12, 2026, including the new section 272.1 of the CPA and the prohibition of clauses preventing consumer reviews.  2. New operational obligations to come into force on September 12, 2026  Ticket resale   The provisions focus on disclosure, such that the consumer must:  Be informed that they are using a resale platform  Be given clear information about the ticket, its original price, and any terms and conditions  Be given a price breakdown, as fees are not prohibited but must be itemized  Contracts involving sequential performance and online subscriptions   The cancellation mechanism must genuinely be accessible, without undue obstacles. Notice must be given before the end of a promotional or free period and before a new price takes effect. The notice regarding a free or discounted period coming to an end does not apply to contracts already in effect on September 12, 2026.  3. Heightened risk for merchants with the change in section 272.1 of the CPA opening the door to legal action  The new section 272.1 of the CPA provides that a merchant who demands payment of a sum in violation of the CPA must refund that sum, regardless of whether a service was provided in return.  Most importantly, the provision is made “declaratory” to depart from the Court of Appeal’s approach in Union des consommateurs c. Air Canada (2025 QCCA 480), significantly limiting defences based on the absence of quantifiable harm and opening the door to immediate and even retroactive application, increasing the financial and legal risk.  2025 QCCA 480 (CanLII) | Union des consommateurs c. Air Canada | CanLII Richard c Time, 2012 SCC 8 2022 QCCA 635 (CanLII) | Fortin c. Mazda Canada inc. | CanLII

The Act to protect consumers from planned obsolescence and to promote the durability, repairability and maintenance of goods (“Law 29”) was adopted as part of an effort to modernize consumer law in Quebec. It amends the Consumer Protection Act1 (“CPA”) and is intended to better protect consumers in terms of the durability and repairability of goods. The main changes brought about by Law 29 can be summarized as follows: It introduces a legal warranty of good working order for certain commonly used new goods. It enhances the legal warranty of availability of replacement parts and repair services for goods that require maintenance work. Regarding additional warranties, it adds an obligation for merchants to inform consumers, before entering into a contract, of the existence and content of any legal warranty of good working order. It prohibits marketing goods with planned obsolescence and using techniques that make it more difficult for consumers to maintain or repair goods. These new measures have been gradually coming into force since October 5, 2023. The legal warranty of good working order will start to apply on October 5, 2026, marking the last phase of implementation2. 1.     The legal warranty of good working order Under sections 38.1 and following of the CPA, certain new consumer goods will be covered by a warranty of good working order at the time of sale. Entry into force and scope The new warranty will come into force on October 5, 2026. It imposes a minimum period of good working order during which the merchant or manufacturer of a good will be bound to cover repair costs, including parts and labour3. Exclusions However, the following will not be covered by the warranty: Normal maintenance and the resulting replacement of parts Damage resulting from misuse by the consumer4. Covered goods and duration of the warranty The Regulation respecting the application of the Consumer Protection Act5 (the “Regulation”) determines which goods are covered and the duration of the warranty6 that applies to each good. Here are some examples: Range, refrigerator, freezer, air conditioner and heat pump: six years Dishwasher, washing machine, dryer: five years Television set: four years Desktop computer, laptop, tablet, cell phone, video game console: three years 2.    Display and disclosure obligations Before a contract is entered into For in-store sales, merchants will have to display the duration of the warranty of good working order applicable to the good near the good’s price7. Also, before entering into a contract containing an additional warranty for goods already covered by the warranty of good working order, merchants will have to provide consumers with a notice informing them of the existence and scope of such warranty, in accordance with the requirements of sections 91.9 and 91.10 of the Regulation8. After a contract has been entered into After a sale, the merchant will have to provide the consumer with a written document outlining the legal warranty of good working order, including their obligations in the event of malfunction of the goods during the coverage period9. Penalties A merchant or manufacturer who fails to indicate the duration of the warranty near the sale price or fails to provide the associated document after the sale will be subject to a fine ranging from $3,000 to $75,000 (in the case of a legal person)10. 3.    Our advice With the legal warranty of good working order slated to come into force in fall 2026, manufacturers and merchants operating within Quebec should prepare to deal with the new warranty now, in particular by: Identifying the goods that may be subject to the warranty Confirming which minimal periods of good working order apply under the Regulation Updating labels, in-store displays and information materials Reviewing contractual and pre-contractual documentation, including documents provided during the sale of additional warranties, to incorporate the required notices Given that the warranty will require covering certain repair costs, and that it will come with specific obligations regarding displays and consumer information, we highly recommend that you go through with the above analysis. We are available to assist you with the implementation of measures to comply with the new requirements of Law 29, in particular by helping you identify affected products, reviewing your documentation and disclosures and providing advice on how to adapt your business practices. Consumer Protection Act, CQLR c. P-40.1 Supra note 1, s. 37 Id., s. 38.2. Id., s. 38.3. Regulation to amend the Regulation respecting the application of the Consumer Protection Act, O.C. 1459-2025 (G.O. II), s. 1. Regulation respecting the application of the Consumer Protection Act, CQLR, c. P-40.1, r. 3. Id., s. 38.8. Supra, note 5, ss. 3 and 4. Supra, note 1, s. 38.9. Supra, note 1, s. 277.

A battle of the forms arises where two parties—often two companies—are negotiating the terms of a contract and each party wishes to contract on its own terms. For example, A offers to buy goods from B on A’s terms (the purchase terms), and B claims to accept A’s offer, but on B’s terms (the sales terms). At this point, there is no doubt that the parties have entered into a contract. But the question is, which terms actually apply? Purchasing, procurement and sales teams are often confronted with this situation, and if not managed properly, it can create a major blind spot in terms of risk. Some jurisdictions address this issue by applying specific principles. For instance, they may enforce the “first shot rule” or the “last shot rule”, whereby only the terms and conditions communicated first or last apply, while the others are eliminated. Other jurisdictions simply refer to contract law to settle such matters. Battle of the forms in Quebec Quebec courts simply refer to the general rules that apply to contract law, which are set out in the Civil Code of Québec1 (hereinafter the “CCQ”). Regardless of the means of communication used, a contract comes into force where and when the offeror receives acceptance of the offer. According to articles 1388 and 1389 of the CCQ, an acceptance sent to the offeror will only be deemed valid if it includes all of the essential elements of the offer. If not, the offer will be considered a counter-offer, which will be subject to the same terms and conditions, namely that the acceptance must include all of the essential elements. And if that is not the case, the response to the counter-offer will be considered a counter-counter-offer under article 1393 of the CCQ. This ping-pong situation can continue until the acceptance sent to the offeror is deemed valid. If a disagreement relating to the contract is considered “non-essential,” the courts defer to the parties’ common intention at the time the contract was drafted. Landmark decision: STMicroelectronics Inc. c. Matrox Graphics To this day, the landmark decision in this regard remains the decision in STMicroelectronics Inc. c. Matrox Graphics.2 In this particular case, there was a clause in the contract that required the buyer to acknowledge that the only courts with jurisdiction in the matter were the courts of the United States sitting in Dallas County, Texas: 19. GOVERNING LAWS: This contract will be governed by and construed in accordance with the laws of the State of Texas, and, in the case of an international sale of goods with respect to which the Convention on Contracts for the International Sale of Goods ("CISG") or any other law would otherwise apply, the Uniform Commercial Code as adopted in the State of Texas, and not CISG or any such other law, shall apply. Buyer agrees that it will submit to the personal jurisdiction of the competent courts of the State of Texas and of the United States sitting in Dallas County, Texas, in any controversy or claim arising out of the sale contract, and that service process mailed to it at the address appearing on the reverse side hereof by registered mail, return receipt requested, shall be effective service of process in any such court. On one side, STMicroelectronics Inc. was of the opinion that the above clause applied and that only the courts of the State of Texas and of the United States sitting in Dallas County, Texas, had jurisdiction. On the other, Matrox Graphics Inc. argued that it never explicitly or implicitly accepted the terms and conditions of STMicroelectronics Inc. At that point, the court examined the battle of the forms situation and had to determine whether the terms and conditions of STMicroelectronics Inc. or Matrox Graphics Inc. took precedence. The evidence shows that both parties’ representatives sincerely believed that their respective terms and conditions prevailed.3 The court concluded that the parties’ respective clauses complemented each other and could be read and applied together, as opposed to being mutually exclusive.4 The mere exchange of terms and conditions through purchase orders during each transaction was binding on the parties, and their silence regarding such terms and conditions was not exculpatory.5 Thus, the terms and conditions of both parties applied.6 The remaining question was that of the scope of Clause 5 of Matrox’s terms and conditions, which reads as follows: Terms and Conditions: . . . 5)  The Terms and Conditions will prevail notwithstanding any different or conflicting Terms and Conditions which may appear on any order acknowledgment submitted by the seller. The Court of Appeal judges indicated that this clause was open to different interpretations.7 The use of the word “prevail” in relation to conflicting clauses obviously required that there actually be a conflict between clauses. Matrox Graphics Inc. could not simply state that only its terms and conditions applied. In this case, the terms and conditions of Matrox Graphics Inc. did not include a clause regarding the courts’ jurisdiction  to hear a dispute. Thus, Clause 19 of STMicroelectronics Inc. applied.8 The court ultimately ruled that although STMicroelectronics Inc.’s Clause 19 applied, the wording of the clause was not sufficiently binding to force Matrox Graphics Inc. to litigate in Texas.9 Consequences of battles of the forms The following is a non-exhaustive list of the possible consequences of accepting the other party’s terms and conditions: A warranty that is longer (or shorter) than expected, or even no warranty at all. Unfavourable payment terms and legal proceedings in a different country in the event of non-payment. Unilateral changes to prices or requirements regarding products or services, or even potential penalties. Unforeseen transportation costs and terms and conditions. Restrictions on use or issues related to intellectual property. Deal with this issue in practice Here are a few tips to avoid confusion when applying the clauses of a given contract and prevent unintended interpretations of its terms and conditions: Negotiation of a master contract: Where there is an ongoing contractual relationship, negotiating a master contract is recommended to reduce the risk of ambiguity in the interpretation of clauses.  Addition of a clause in the purchase order: A buyer may include its terms and conditions of purchase in the purchase order and specify that only its general conditions apply to the contract. Alternatively, it may exclude any different or additional terms and conditions appearing on the seller’s documents. Although purchase orders are typically issued by the buyer, the seller may negotiate the addition of specific clauses to impose its terms and conditions of sale. Issuance of a confirmation slip: A confirmation slip is often sent upon receipt of a purchase order. It allows one party (usually the seller) to confirm acceptance of the order, while setting out the terms and conditions under which this acceptance is given. Just how effective this type of clause is really depends on how it is worded, so drafting it in clear terms that leave no room for interpretation is crucial. Outside Quebec: several possible solutions Any contract entered into outside Quebec may be subject to entirely different methods for resolving battles of the forms. In practice, there appear to be three widely accepted principles to address this issue. In Canada—with the exception of Quebec—the last shot rule is most commonly applied. According to this rule, the terms and conditions of whichever party is last to send or acknowledge the contract will apply. It is based on the general rules governing offers and acceptance. The landmark ruling in this regard was handed down by the Court of Appeal of England and Wales, which provided an essential clarification on this legal principle:10 In most cases, when there is a battle of the forms, there is a contract as soon as the last of the forms  is sent and received without objection being taken to it . . . In some cases, the battle is won by the man who fires the last shot. He is the man who puts forward the latest terms and conditions: and, if they are not objected to by the other party, he may be taken to have agreed to them . . . Another widely accepted principle is known as  the knock-out rule.  According to this rule, a contract is considered valid even where offer and acceptance do not perfectly match due to the differing general conditions. The terms governing the contract are those that are common in substance in the general conditions of both the seller and the buyer. The differing terms cancel each other out and are replaced by the default rules provided for by the applicable law. The knock-out rule applies in several countries, including the United States, France and Germany.11 The big downside is that, when applied, it generally excludes the applicable law clause, which is commonly found in both sales and purchase terms and conditions and sets out choice of forum and choice of law clauses that typically differ. The last of the three principles is called the first shot rule, whereby the terms and conditions contained in the first contractual offer prevail over subsequent ones.12 Although this principle is not as popular or frequently applied as the others, it is used and codified in Article 6:225 of the Civil Code of the Netherlands.13 Ultimately, it seems that each jurisdiction applies its own principle, with no particular one being regarded as superior to the others. Although Quebec does not apply any of the principles, it does seem to favour the last shot rule, which can lead to a ping-pong situation. In such cases, the challenge lies in determining which party sent the final version of the contract. Written with the collaboration of Me Laure Pinlon, Director of Legal Affairs at Luqia Technologies. Specifically, articles 1387 et seq. and 1425 et seq. STMicroelectronics Inc. c. Matrox Graphics Inc., 2007 QCCA 1784 STMicroelectronics Inc. c. Matrox Graphics Inc., 2007 QCCS 31, para. 26. STMicroelectronics Inc. c. Matrox Graphics Inc., 2007 QCCA 1784, para. 62. Achilles (USA) c. Plastics Dura Plastics (1977) ltée/Ltd., 2006 QCCA 1523, para. 24. STMicroelectronics Inc. c. Matrox Graphics Inc., 2007 QCCA 1784, para. 40. STMicroelectronics Inc. c. Matrox Graphics Inc., 2007 QCCA 1784, para. 51. STMicroelectronics Inc. c. Matrox Graphics Inc., 2007 QCCA 1784, para. 62. STMicroelectronics Inc. c. Matrox Graphics Inc., 2007 QCCA 1784, para. 126. Butler Machine Tool Co Ltd. v Ex-Cell-O Corp (England) Ltd. [1977] EWCA Civ 9 (25 April 1977), para. 62. Giesela Rühl, “The battle of the forms : comparative and economic observations”, (2003) 24:1 University of Pennsylvania Journal of International Economic, pp. 198 and 199. John Henry Davis, “Defense of the Battle of Forms: Curing the First Shot Flaw in Section 2-207 of the Uniform Commercial Code” (1973) 49:2 Notre Dame Law 384, p. 389. Burgerlijk Wetboek (Civil Code of the Netherlands), Book 6, Article 6:225.