Business, Quebec, Quebec Court of Appeal, Rulings
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Landmark ruling clarifies franchisor’s obligations

In a “sad saga” of a successful franchise operation that suffered a meltdown in Quebec following aggressive and fierce competition, a 12-year legal battle came to a bittersweet end after the Quebec Court of Appeal upheld a lower court ruling and ordered Dunkin’ Brands Canada Ltd. to pay 21 Quebec franchisees nearly $11 million, an amount that rises to $18 million with interest and additional indemnity, for breach of contract, misrepresentation, and negligence.

In the biggest Quebec franchising case in nearly two decades, the Quebec Court of Appeal concluded that the franchise agreements between Dunkin’ Donuts and its franchisees explicitly imposed on Dunkin’ Donuts an obligation of means to take reasonable and timely measures to protect and enhance its brand, particularly in the face of market changes. The franchisor was also bound by obligations that could be implied in the agreement under article 1434 of the Civil Code of Quebec (CCQ), including the implied obligation to act in good faith towards its franchisees, to cooperate with them, and to assist them, held the appeal court. “The obligations owed by the franchisor were not only those explicitly stated in the agreements but also implicit obligations that flowed from the nature of the franchise agreement,” said appeal court Justice Nicholas Kasirer in a unanimous 53-page ruling in Dunkin Brands Canada Ltd. v. Bertico Inc. 2015 QCCA 624.

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