The Quebec Court of Appeal decides a dispute on the basis of an "Entire Agreement" clause

At the end of 2024, the Court of Appeal rendered its decision in Groupe Inco inc. / Inco Group Inc. v. Groupe VSLG inc.  (2024 QCCA 1436).

This case concerns a trade dispute over the supply and sale of masks and medical equipment during the COVID-19 pandemic.

After an initial confidentiality agreement, INCO and VSLG signed, in April 2020, a supply contract under which INCO became the exclusive supplier of VSLG for two types of N95 masks. Various obligations are provided for in the contract to ensure that VSLG respects the business relationships developed by INCO with its co-contractors, including a non-solicitation clause with a penalty of US$5,000,000.

Subsequently, in June 2020, INCO and VSLG signed a partnership contract for the sale of various medical products, sharing the profits at 50% and INCO gave VSLG an extended authorization to communicate with its co-contractors to facilitate transactions.

A few months later, INCO accused VSLG of violating the non-solicitation clause of the supply contract by dealing directly with some of its co-contractors and requested payment of the US$5,000,000 penalty provided for in this supply contract.  After being rejected at first instance, INCO appealed to the Quebec Court of Appeal.

The Court of Appeal notes that the transactions at the root of the claim occurred under the partnership contract while the provisions upon which INCO bases its recourse are found in the supply contract. However, the partnership contract contains the following “entire agreement” clause:

"This Agreement and any other contracts, agreements, understandings and schedules referred to herein shall constitute the final, complete and exclusive expression of the terms of the contract between the Parties with respect to the subject matter of this Agreement. This Agreement supersedes any current or prior agreements, understandings, and schedules not expressly referred to in this Agreement. Neither party has entered into this Agreement in reliance on any other contract, agreement, understanding, promise, undertaking, or warranty other than those explicitly incorporated as described in this Agreement. This Agreement shall be governed by the laws of Quebec. »

On the basis of this provision, the Court of Appeal concluded that the non-solicitation clause and penalty found in the supply contract could not apply to the activities under the partnership contract and dismissed INCO's appeal.

Reminder

When entering into several agreements with the same contracting party, pay particular attention to the “entire agreement” clause and make sure that each contract contains all the necessary clauses.