Droit inc. – Protecting Deal Value: Article 2125 C.c.Q. Waivers in Service-Contract and M&A Transactions

Our recent article, Préserver la valeur des transactions : les renonciations à l’article 2125 C.c.Q. dans les contrats de service et les opérations de fusion et acquisition, authored by George Maughan and Roy Cheung, was republished by Droit inc. (available in French only).

In this article, the authors analyze the Québec Court of Appeal’s decision in Veilleux c. ICAR inc., which highlights the transactional risks associated with article 2125 of the Civil Code of Québec. Absent an express waiver, article 2125 grants either party to a contract for services the right to terminate the agreement unilaterally and without cause—a default rule that can materially undermine deal value in mergers and acquisitions when key service or enterprise contracts remain terminable at will.

The authors explain that Québec courts will not presume a waiver of this statutory right and require clear, precise, and unequivocal contractual language, supported by free and informed consent. The article also clarifies the limited scope of compensation payable upon termination under article 2125, which generally excludes future profits unless expressly agreed otherwise.

From a transactional perspective, the article underscores the importance for M&A professionals of carefully reviewing service contracts during due diligence, assessing the validity of any purported waivers, and addressing residual risk through appropriate deal protections, including representations and warranties, price adjustments, and indemnity mechanisms.

Read the full article on Droit inc.