Limitation and Exclusion of Liability Clauses Under Quebec Law: Legal Guidance and Drafting Tips

The inclusion of limitation and exclusion of liability clauses in contracts entered into in Quebec requires an understanding of civil law and public order restrictions. Since the Supreme Court of Canada (SCC) ruling in 6362222 Canada inc. v. Prelco inc. (Prelco) in 2021, case law developments have highlighted the importance of properly framing and drafting such clauses so that they may be enforceable against another contracting party.

Here are five key insights on non-liability clauses under Quebec law:

1. Legislative Framework of the Civil Code of Québec (CCQ). The CCQ generally permits the exclusion or limitation of contractual liability, with a few fundamental exceptions. Most notably, pursuant to article 1474 CCQ, liability cannot be excluded for intentional or gross fault. Articles 1437 CCQ and 1733 CCQ also limit the effects of such clauses in certain contexts.
2. Limitations on Exclusions for Latent Defects. The latent defects regime remains an important exception. Even among sophisticated professionals, a manufacturer and a professional seller will be unable to rely on a limitation (or exclusion) of liability clause unless they can rebut the presumption of knowledge of the defect applicable to them.
3. Types of Contracts and Effects on Validity. The treatment of a limitation or exclusion of liability clause differs according to whether such clause is in a contract by mutual agreement (freely negotiated, notably between companies), or in a consumer contract or contract of adhesion (Article 1437 CCQ). Quebec courts require that a rigorous contextual and factual analysis be carried out to determine whether such a clause can be invoked.
4. Stricter Application of the Principle of Freedom of Contract. In Prelco, the SCC reaffirmed that limitation and exclusion of liability clauses are generally valid and apply to parties considered sophisticated, even where such clauses relate to a fundamental obligation of the contract.
5. Tips for Drafting Clauses. For a clause to be valid, it must be clear, explicit and unambiguously integrated with the contract. It is also essential that the party against whom the clause is invoked was aware of its existence at the time the contract was formed.