Summary

Keywords

Contracts - Non-performance, Damages, Quantum.

Summary

Case summaries are prepared by the Office of the Registrar of the Supreme Court of Canada (Law Branch). Please note that summaries are not provided to the Judges of the Court. They are placed on the Court file and website for information purposes only.

Contracts – Franchise agreements – Non-performance – Damages – Quantum – Does the general obligation of good faith impose on franchisors implied duties to enhance the brand and stave off competition – Can causation for the alleged breach of such duties be inferred simply by looking at the actual results, without having to consider whether a different conduct would have led to different results – Does the aggregation of individual claims into a common trial alleviate or shift the burden of proof incumbent on the plaintiff with respect to damages – Civil Code of Québec, CQLR c C-1991, art. 1434.

Twenty-one respondent franchisees who had operated 32 restaurants in the Dunkin’ Donuts chain in the 1990’s and 2000’s brought proceedings for breach of contract against their franchisor. They alleged that the franchisor repeatedly breached its contractual obligation to protect and promote the Dunkin’ Donuts brand in Quebec during a period of serious competition, causing them lost profits and investments and leading to the collapse of the brand in Quebec. They sought the formal termination of their leases and franchise agreements as well as damages. The franchisor denied any breach, claiming that the franchisees had failed to operate within standards, and had executed releases barring any claims against it. It also brought cross-demands for unpaid royalties and other sums and for damages for defamation and abuse of process.

The Superior Court of Quebec maintained the franchisees’ actions and dismissed the franchisor’s defences and cross-claims. The Court annulled the franchisees’ releases, resiled their leases and franchise agreements and ordered the franchisor to pay the franchisees global damages of $16,407,143. The Court of Appeal of Quebec confirmed the finding of liability but allowed the franchisor’s appeal in part, maintaining the franchisor’s defences and cross-claims to extent of granting the amounts of $899,528 and $249,316 and revising the order to pay global damages to the franchisees to $10,908,513,25.