2013 QCCQ 7710, 2013 QCCQ 7710

Bennett Little Group of Companies Ltd. c. Lyreco Inc. COURT OF QUEBEC 2013 QCCQ 7710 CANADA PROVINCE OF QUEBEC DISTRICT OF MONTREAL Civil Division N°: 500-22-181293-112 DATE: July 16, 2013 ______________________________________________________________________ PRESIDED BY THE HONOURABLE DAVID L. CAMERON, J.C.Q. ______________________________________________________________________ BENNETT LITTLE GROUP OF COMPANIES LTD. Plaintiff v. LYRECO INC. Defendant ______________________________________________________________________ JUDGMENT ______________________________________________________________________ I.

Parties and Proceedings Introduction [ 1 ] The dispute arises out of a business relationship between the parties for the supply to the Quebec government (“Quebec”) of a made-to- specification briefcase bearing its name and logo. [ 2 ] The Plaintiff, Bennett Little Group of Companies Ltd. (“Bennett Little”), had previously supplied the product directly to Quebec pursuant to longstanding arrangements since approximately 2004. [ 3 ] As of 2008, Quebec changed its practices and closed its warehouse, looking to third parties to provide its supply of a variety of products.

Rather than keep an inventory on hand, Quebec would enter into supply agreements for fixed periods enabling it to purchase products as required at prices set for future periods. [ 4 ] In September 2008, the defendant Lyreco Inc. (“Lyreco”) responded to a call for tenders and was awarded by Quebec a contract (P-18) to supply, among other things, the briefcases, known as model B-9254-5, for two years. The contract was subsequently renewed.

In order to procure the briefcases, Lyreco entered into a relationship with Bennettt Little, who was interested in continuing to see to the manufacturing of the briefcases. [ 5 ] The present dispute relates to the period of supply of June 2010 to June 2011, referred to by Lyreco as the 2010 supply agreement. The action [ 6 ] Bennettt Little bases its action on a contract it alleges having formed with Lyreco in June 2010 for the supply of 240 units of the briefcase at a rate of 20 per month until June 2011.

It alleges that Lyreco seriously breached this agreement by refusing to order the required volume of units which Bennett Little had procured from its manufacturer. It seeks resiliation of the agreement, damages in the amount of $ 16,372.80, representing the contract price and $ 5,000 in damages for stress, trouble and inconvenience.

The defence [ 7 ] Lyreco bases its defence on a different view of the agreement, namely that the price was the only element determined by the parties' consent, the number of units, if any, to be purchased depending on the requirements, if any, of the Quebec for the supply that would be made known from time to time. [ 8 ] Pursuant to this concept of the agreement, Lyreco, while refusing to order the quantities that Bennettt Little demanded it to purchase, did eventually place an order for 24 units, which Bennettt Little refused to fill. [ 9 ] At trial, Lyreco enhanced its grounds of defence by alleging, subsidiarily, that Bennettt Little ought to have mitigated its damages by accepting the order for 24 units and by agreeing to remain ready to fulfil any other orders that Lyreco might make from time to irrespective of the quantity of 240 units that Bennettt Little had procured.

II. Issues [ 10 ] The Court is called upon to answer the following questions: 1. Is Lyreco in default of its obligations by not ordering 240 units of the briefcase in the one-year period ending June 2011? 2. If so, is Bennettt Little well-founded to seek the resiliation of the agreement? 3. What is the true measure of compensatory damages owed to Bennettt Little? 4. Should these damages be reduced because of a failure to mitigate on the part of Bennett Little? III. Factual material [ 11 ] The legal relationship between the parties is not documented by elaborate written agreements.

The process by which contracts were formed was predetermined, to some extent, by Lyreco's price quoting system, a very

summary procedure, but also by Bennettt Little's demands made in the negotiation which were dictated by the commercial realities it was facing. These demands dealt with volume and timing of production, as well as price. [ 12 ] To understand the process as it occurred for the 2010-2011 period, it is necessary to review the relationship from the outset. 2008 [ 13 ] In quoting its price to the Quebec Government, Lyreco had received a quotation from Bennettt Little.

In After obtaining the “Main Supply Agreement” with the Government of Quebec, Lyreco did not immediately place an order with Bennettt Little. [ 14 ] Mr Bennettt S. Little, the president and CEO began inquiring with Lyreco in November 2008.

Asked by Cathy Timmins to state the minimum order quantity (MOQ) and that the cost is $ 38.42 (D-1, email of December 1, 2008), FOB Kingston, Mr Little replies (email of December 2) that the price of $ 38.42 is valid for Kingston and that the price is for one delivery 90 days from the date of order receipt. [ 15 ] He enquires again with Ms Timmins on December 9, 2008 reminding her that the 90 day period from the bid has expired. [ 16 ] On December 15, 2008, he demands an answer by December 16. [ 17 ] The negotiations begin in earnest on December 16. Marc Chochoy, a director of marketing has stepped in.

The main concern from Mr Little's point of view is that production of 315 cases should take place in one production run in order to be efficient. This is a problem for Lyreco who does not want to carry one year of stock.

It would prefer ordering in smaller quantities of 30, 60 or 90 units. [ 18 ] Mr Little gives Lyreco two options, three orders of 105 units at $ 59.73 or a single order of 315 units at $ 46.71, with a down payment of 30% of the entire production, $ 4,414.10. [ 19 ] After more discussion, an agreement is reached at a slightly higher price with the modalities confirmed by Marc Chochoy: […] - You will produce 315 at once; - We'll order 105 per order; - We'll pay the down payment (which is the first order in fact). […] [ 20 ] Three orders for 105 units each at $ 46.85 per unit are placed on December 23, 2008 to be delivered April 30, August 30 and October 30, 2009.

Each order is for $ 4,919.25 (P-16). 2009 [ 21 ] These orders have not yet been filled when Lyreco approaches Bennettt Little again for a price quotation so that it can revise its price with Quebec. Under the contract, Lyreco has a window of opportunity to re-establish the price each year. [ 22 ] Cathy Timmons’ email of April 30, 2009 (D-3) attaches a document in Excel spreadsheet format (with the suffix “.xls”) called a “Master Product Sheet”. She indicates that Lyreco requires two levels of pricing based on different monthly forecasts. The prices quoted must be firm for one year.

Bennettt Little is to insert its quote in the spreadsheet file. She also attaches another Excel file called the “Master Vendor Sheet” wherein Bennettt Little is to insert updated information. [ 23 ] Lyreco's forms indicate that the monthly forecast is 10 units. The current minimum order quantity of 105 should be reduced to 10. [ 24 ] Mr Bennettt fills in the forms with a price of $ 56.12 per unit and adds, under Vendor Comments: $ 56.12 for 10 a month (counting transport). Or $ 52.07 if purchased 30/time.

Thank you for continuing our relationship as agreed and contracted we will be delivering 105 in August 2009 and 105 in October 2009. The quoted prices will take effect after that and are firm until July 1 st , 2010. [ 25 ] He returns the completed .xls files as attachments to an email on May 8, 2009 prior to the deadline. The text of the email reads: Thank you for continuing our relationship – as agreed and contracted, we will be delivering 105 in August 2009 and 105 in October 2009.

The quoted prices will take effect after that and are firm until July 1 st , 2010. [ 26 ] Lyreco does not reply to this quote and does not place any order or confirm in any other way it's acceptance of the new conditions

proposed by Bennett Little. [ 27 ] Bennettt Little carries out the three orders previously confirmed in 2008 making delivery as stipulated in 2009. 2010 [ 28 ] Lyreco repeats the process in March 2010 [1] , this time to obtain a price so that it can quote on the renewal of the Main Supply Agreement which is to expire at the end of May 2010.

Using the same type of .xls spreadsheet files, Cathy Timmons sends out a similar email seeking pricing based on monthly forecasts of 20 units per month and a MOQ of 20 units (P-1). [ 29 ] The form states that the current MOQ is 105, based apparently on the original contract of 2008, which is consistent with the three orders of 105 units under the 2008 agreement. [ 30 ] Mr Bennettt sends back the file (P-2) inserting a price of $ 68.22 and adding in the column Vendor Comments: Prices FOB your warehouse, firm for 1 year on this custom-made item, based on monthly delivery of 20 per month. [ 31 ] His covering email of April 1 reads: Ms Timmins - thank you for the opportunity to quote on your requirements.

This product is custom-made by us and is priced according to your stipulated monthly shipping requirements, FOB your warehouse. The price will be held firm to June 30 th , 2011. Please let us know as soon as possible as production needs approximately 3 months – the material is specially made and then is cut by hand to fit the frames (which are made by hand) and then they have to be printed. Thank you for your consideration and understanding. If you have any question, please let us know.

Have a Happy Easter Holiday. […] [ 32 ] In order to be able to give this quote, Mr Little has had certain negotiations with his Chinese supplier. It is difficult to order such a small quantity as 240 units (20 per month for one year). He makes certain concessions, such as offering to pay for his supplier’s unused material.

As was the case in 2008, he cannot order the monthly quantity from time to time: he has to have all 240 manufactured in one production run. [ 33 ] Lyreco's confirmation that Bennettt Little has been awarded the contract comes on June 28, 2010 in an email (P-3) from Cathy Timmons to Sharon, of Customer Service: Hi Sharon, Good News!! I’ve received the official word, and am pleased to let you know, that your company has won the tender for the Quebec Gov’t for another year (until June 1, 2011).

Thank your for your patience, on the confirmation of the tender. [ 34 ] Bennettt Little goes ahead and procures the 240 units from the manufacturer in China. [ 35 ] In October, it is ready to ship. Sharon Byfield writes to Cathy Timmons on October 13, 2010 (P-4): Cathy, Just left you a message… We are getting ready to ship out the Valise to Lyreco… but just realize that we did not receive a Purchase Orders. Please advise ASAP. […] [ 36 ] But Lyreco is overstocked. Its policy is to keep as little stock as possible. It has miscalculated.

Having acquired the 57 units Quebec had on hand when it closed its warehouse in October 2008, as well as the 350 units purchased in 2008-9, it has not sold as many units as anticipated to Quebec. An inventory reconciliation shows that it currently has 72 units in stock (D-4) There is no need to replenish its stock for several months. Cathy Thimmons replies to Sharon Byfield (P-5): Hi Sharon, As I explained on the phone today, we still have 70 of these briefcases in stock, and the Quebec Gov’t has only been ordering approximately 12 of these a month (which means that we still have around 6 months worth of stock).

So, we will not be placing a Purchase order for theses briefcases, until our stock runs down to about a month’s worth. Then at that time, we will create a P.O. (and send it over to you). Sincerely, Cathy Timmins Customer Specific Specialist [ 37 ] Alerted to the problem, Mr Bennett begins a series of email communications that extend over the next few months first with Cathy Timmons (P-6), then with Kelly Swan (P-7, P-8, P-9, P-10); then with Catty Timmons again (P-11, P-12).

The positions quickly polarise: Mr Bennettt states that he expects the full quantity of 240 units to be ordered over the one-year period that the pricing refers to; on October 22, 2010 he insists on 100 immediately and 20 per month from then on (P-8). Kelly Swan takes the position that he is misinterpreting the rfq (request for quote) and response and that Lyreco cannot agree to order these quantities over the time frame required by Bennettt Little. [ 38 ] She does foresee an order of 60 units in late December, early January.

[ 39 ] On October 22, in a final exchange between 12:09 and 12:40 p.m., the parties look forward to discussing a marketing plan to accelerate purchasing. Nothing happens. In January, Sharon Byfield begins requesting orders again (P-11). On January 11, 20100 Cathy Timmins replies, anticipating an order will be placed at the end of February. [ 40 ] January 12, 2011, Mr Little puts Lyreco in default (P-13): […] Ms Timmins, good morning. The facts of this matter are unequivocally simple and straightforward – we have been exceedingly patient and accommodating and you are taking gross advantage of our consideration.

By now, this contract should have been ½ over. We have more than honoured the contractual obligations stated and implied in your bid – nowhere was there any mention that we would be hostage to what your sales would or would not be. If I were to attempt to upstream our problems onto you – transport costs being higher than anticipated, for example – you would immediately and correctly refuse, saying that a deal is a deal and that the terms were specified in your bid. It is equally unacceptable for you to downstream your problems, real or imagined, onto us. You made a deal and I expect it to be honoured.

I am not prepared to wait almost another 2 months for you to maybe begin honouring your commitment. I am not prepared to wait another 2 days. I will expect your order within the next 24 hours failing which you will leave me no other alternative but to explore any and all options including tendering the merchandise for immediate sale and holding your firm responsible for any shortfall (should there be any). DO GOVERN YOURSELF ACCORDINGLY, Bennett S. Little [ 41 ] This is followed by a similar letter, this time by attorney, on January 31, 2011 (P-14).

As before, but with the passage of time, the claim is now for an immediate order of 120 units and six consecutive monthly orders of 20 each. [ 42 ] A discussion takes place the next day between Marc Chochoy, the Director of Marketing who was a key person in the first contract, in 2008 and Mr Little. [ 43 ] The outcome of the discussion is an agreement where both sides make concessions from their previously-stated positions: Lyreco will immediately order half the quantity and will order the other half over a six-month period, thereby extending the contract to duration of 18- 20 months, with no financial compensation to Bennettt Little for its extra carrying costs. [ 44 ] According to Mr Little's testimony, the tone of the conversation was amiable, but he took a firm position. [ 45 ] Marc Chochoy admits in his testimony that he made the agreement, though he cannot recall the details, but that it was made under threat of litigation, in a tone that was “rude”.

He felt pressured (“impressionné”) by the threats, having never been involved in court litigation despite having had dealings with hundreds of suppliers for ten years, managing over 100 million dollars of orders per year. [ 46 ] He spoke to his superior, and it was decided not to give in to threats of court action, to hold to their position, and to place an order for 24 units, rather than follow the agreement made the previous day. [ 47 ] February 2, 2011 Marc Chochoy writes (D-5) proposing, essentially, that Lyreco will agree to carry the equivalent of two months of stock rather than the 20 days dictated by its policies: Dear Mr Little, This is unfortunate that we find ourselves in this situation.

As indicated in our discussion, the 20 units/months was an estimate of the Quebec Government’s future consumption (based on this customers’ previous consumption), as it was written in the Master Product Sheet (see the attached document, cell H2 – Min Order Qty & Estimates based on Lyreco unit of measure). The monthly estimate was provided to give guidance for your quotation. Unfortunately, in the past months, the consumption of this item has decreased to an average of 12 units per month. Our rule is to re- order stock of products from our vendors to give us one month inventory based on buying trends.

As we still have inventory of your product in our warehouse, we have not placed another P/O, yet. From our perspective, and as standard Lyreco practice, a trigger for any production must start with a purchase order. In order to find a solution, Lyreco proposes: • Rather than carrying 20 days of stock of your product, Lyreco will carry approximately 2 months of stock (40 days) in our inventory.

Based on current consumption, we will therefore place a P/O of 24 units by the end of this week. • Moving forward after this first P/O of 24 units, Lyreco will continue to carry 2 months of stock (still based on the customer’s consumption) on this item and will continue to order this briefcase exclusively from Business Stationers as long as service levels and price remain at an acceptable level. • Please note that if the Quebec Government’s consumption goes up or down, we’ll adjust our inventory as required.

Best regards, Marc Chochoy [ 48 ] Feeling that Lyreco had not kept its commitments to date, and that it would hold him to its revision of the terms of the agreement if he accepted to send the shipment, Mr Little decides not to act on the order. He does not want to compromise his position, believing that if he did, Lyreco would drag out the contract further.

He would have effectively negated the terms of the agreement to his prejudice. [ 49 ] The order, for 24 units, is followed up automatically by Lyreco with three past-due notices in February and an email reminder on March 17, 2011 (D-12). [ 50 ] March 18, 2011 (P-15) another letter of demand is sent by Bennettt Little's attorneys, this time claiming an immediate order of 180 units, that the balance with monthly consecutive orders of 20 units until expiry of the contract.

[ 51 ] Litigation ensues roughly one month later. [ 52 ] Bennettt Little still has the 240 briefcases in is inventory at the time of trial. IV. Analysis The contract [ 53 ] The defence argued very strenuously that the Court must look to the past dealings of the parties in order to adequately determine their common intention.

The principle is very aptly put in an excerpt from a case cited by the defendant's attorney: [50] Rechercher la commune intention des parties, interpréter le contrat en tenant compte des circonstances dans lesquelles il a été conclu et donner une interprétation qui favorise un résultat raisonnable exige que l’on tienne compte aussi de l’ensemble des relations contractuelles existant entre elles [2] . [ 54 ] We agree with the proposition.

The contract formed in 2010 is distinct from that of 2008, but the entire history of the situation is helpful in understanding the exchange of consents that took place. [ 55 ] Certain facts are salient. [ 56 ] The parties had never dealt with each other before 2008. [ 57 ] Lyreco has a standard way of operating with all of its suppliers on this type of supply contract. The price is determined per unit of a given product, fixed for a certain period.

Lyreco quotes a price to its client after obtaining a price from its suppler. [ 58 ] In the case of the contract for the Government of Quebec, the contract provides for a window of opportunity to adjust the price. [ 59 ] There is a minimum order quantity, but not a minimum order: Lyreco's client, and therefore Lyreco, is free to order or not order, so long as, in ordering, it takes the minimum number of units per order.

In effect, the client has an option to purchase over a given period at a predetermined price, but not an obligation to do so. [ 60 ] Lyreco's objective is to secure a supply at a given price, add its markup, and to have the option to purchase at that price if its client comes through with orders. If it does not, then Lyreco retains only a limited inventory on hand, thereby reducing its risk. [ 61 ] The past provides a means of estimating the volume and frequency of orders, but this is only for planning purposes.

Such is Lyreco’s “rule” [3] . [ 62 ] But in 2008, Bennettt Little had never dealt with Lyreco for the supply of these custom-made briefcases. Because they were a non- standard product, Bennettt Little had to set up the manufacturing, which it had been doing for its sales to Quebec for several years with a Chinese manufacturer. [ 63 ] Mr Little said quite clearly, and the Court has no difficulty in believing him, that he would not have been willing to promise to supply the briefcase at a guaranteed price unless he had a commitment from the purchaser to acquire the entire production run over a given year.

He was not prepared to take the risk of being left with unsold inventory that could not be returned to his supplier nor sold to any other customer, because of the client's logo and name being stamped on the product. [ 64 ] In the case of the 2008 contract, the parties clearly stipulated contract terms consistent with Bennettt Little's demands, as well as a start-up payment equal to one third of the orders for the year. This was very standard from Mr Little's point of view, but very atypical from that of Lyreco.

So much so that Lyreco escalated the question to a higher level executive, Mr Chochoy, the person normally in charge of the file not having the authority to make such commitments. [ 65 ] The contract was not formed using any of Lyreco's standard documentation: it was confirmed through an exchange of emails. [ 66 ] Bennettt Little correctly perceived this contract to be a contract for the supply of 315 briefcases at a certain price, with certain delivery dates and terms for payment. [ 67 ] When he was asked in 2009 to respond to a request for new pricing, he understood that he was being asked to quote for a certain quantity over a one-year period at a guaranteed price, and that is what he did.

He quoted a certain price, $ 56.12 “for 10 a month”. [ 68 ] He received no feedback, and, from his point of view, there was no contract, because there was no answer to his quote. [ 69 ] Lyreco takes the position that by responding to the request for pricing, Bennettt Little accepted to be bound to sell an undetermined number of units, if and when ordered, at the price quoted. [ 70 ] This is wishful thinking, after the fact.

Bennettt Little had not agreed to such a procedure in the past, and, in the context, its wording is clear: it is willing to sell at that price, based on a quantity of 10 per month, not based on an hypothetical estimated quantity. [ 71 ] It may be that some employees of Lyreco believed they were dealing, as with other suppliers, according to Lyreco's standard practice, but, as a corporate entity, Lyreco's practice with Bennettt Little establishes, on the contrary, that it was continuing to deal with a supplier who quotes a price based on a commitment to purchase a given quantity over a given time. [ 72 ] In any event, no order was placed according to this quotation. [ 73 ] In March 2010, Lyreco was preparing to renew it's dealings on the Quebec contract and required a price for supply during a one-year

period. [ 74 ] It sent its standard documents again, this time suggesting, based on its estimates, that the customer would require 20 units per month over a one-year period. [ 75 ] Lyreco argues that it made it clear that this was only an estimate of its client's probable needs, not a commitment to actually purchase any particular quantity. [ 76 ] It is difficult for Lyreco to make this point because it did not prove any communications with Bennettt Little, except the sending with a cover email of the standard spreadsheet files. [ 77 ] It is true that the document reads “level A monthly estimate” and “level B monthly estimate” – the word estimate is used, but, in the Vendor Comments, Bennettt Little stipulates that its price is “firm for one year on this custom-made item based on monthly delivery of 20 per month”. [ 78 ] The concept is further explained in the covering email: […] This product is custom-made and is priced according to your stipulated montly requirements FOB your warehouse.

The price will be held firm to June 30, 2011. Please let us know as soon as possible as production needs approximately 3 months […] [ 79 ] It is necessary to analyse Lyreco's reaction at that point in the narrative to the comment made in the column “Vendor Comments” as confirmed in the covering email set out Bennettt Little's contractual proposal. It might not have been consistent with Lyreco's policy to accept such a proposal, but, it acted as though it did accept the proposal.

Without any other communication, other than a request for more time to reply, it eventually informed Bennettt Little that “your company has won the tender for Quebec for another year (until June 1, 2011)”. [ 80 ] Lyreco argues that it was always clear in the parties' contractual relations that a purchase order was necessary before production could begin. The 2009 situation illustrates this point, according to Lyreco, because there was no order and therefore no production. [ 81 ] Lyreco states the case accurately, in part.

In the initial order in 2008, Bennettt Little stipulated an advance payment and received all three orders before agreeing to produce. [ 82 ] But this is not the entire story. When asked to quote in 2008, the parties began a practice: Bennettt Little would provide a guaranteed price over a given period of one year with a certain quantity and frequency of orders. When asked to quote again, in 2009 it did so, on the same basis, with a price, guaranteed period in which that price would be in effect, on the basis of a certain quantity per month.

It never received any confirmation that its quote had been accepted, so it would not have expected an order, having not arranged a new production run. [ 83 ] It was asked to quote a third time in 2010, and did so, again with a price, a period and a quantity. It only began manufacturing when it received an acceptance of that quote.

It did not insist upon an up-front payment, but it adhered to the other aspects of the 2008 deal, with changes to the variables, the price and the quantities. [ 84 ] It is therefore not an accurate analysis of the facts to state that an order was necessary for manufacturing to begin in 2010. [ 85 ] In arguing that an order, for an amount of stock that was previously undetermined, was necessary for a contract to be formed, Lyreco asks the Court to ignore the fact that it was impossible for Bennettt Little to arrange small production runs of 20 or 10 units.

Mr Little made it clear in his correspondence accompanying the 2010 quote that production would take place in a period of 90 days after acceptance of the quote.

Lyreco could not have reasonably believed that Bennettt Little was accepting to produce on an order-by-order basis at some undetermined future time. [ 86 ] Lyreco's argument would make sense with a standard, off-the-shelf product that can be easily sourced on a just-in-time basis, but not for this specific custom-made product, as it knew from its earlier dealings with Bennettt Little. [ 87 ] The testimony of Mr Chochoy is revealing. [ 88 ] When the problem was escalated to his level, surprisingly, because of his high status within Lyreco and the rather small dimensions of the issue for a business of Lyreco's size, he immediately, on the basis of one phone call, made a deal with Mr Little that was mainly consistent with the contract as understood by Bennettt Little with only a minor concession on its part by extending the period in which the price would remain firm. [ 89 ] He readily accepted to commit to the purchase of the entire quantity, even if this went against the standard “rule” of his company. [ 90 ] His explanation that he accepted it under the duress of legal proceedings is not particularly convincing: a business the size and scope of Lyreco would not be intimidated by a legal proceeding for some $ 16,000, as its persistence in bringing the present case to trial confirms.

The idea that Mr Chochoy felt “ impressionné ” meaning threatened or intimidated, by the prospect of a legal proceeding, stands in stark contrast to the comfort and ease of his demeanour before the court as a witness. [ 91 ] It is more plausible that he saw the good sense in Bennettt Little's proposal and accepted it spontaneously, and was later countermanded at a higher level or changed his mind upon further reflection. [ 92 ] Mr Little's position in the negotiation was firm, but not intransigent: he was prepared to give a little on the carrying costs of the inventory by extending the term of the agreement, but not willing to fundamentally change the basis on which he had contracted by accepting entirely the risks associated with the possibility that Quebec would not order the product in any foreseeable volumes. [ 93 ] On a commercial level, it is understandable that Lyreco would want to pass on to its supplier the risk of its client not placing orders for the predicted quantities.

It is also understandable that a small business like Bennettt Little would not be interested in gambling its capital on such risks, and that it would not quote a fixed price on a production run without having an acceptance of its stipulation as to quantity. [ 94 ] The fact that the contract goes against the standard practice of Lyreco's other supplier contracts is not relevant to Bennettt Little's situation, when, for this product and this end user, it had never been part of that standard practice. [ 95 ] The contract must also be interpreted in light of equity.

Having secured a supply of a custom-made product meeting specifications, Bennett Little should not have to expend its capital in a situation where its client, Lyreco, has an option, but not an obligation to purchase.

The remedy of resiliation and mitigation of damages [ 96 ] The Court finds that Lyreco was in default of its obligations by not ordering and receiving shipment of the 240 units of the briefcase in the period ending June 2011. [ 97 ] This was a serious breach, because it put Bennett Little at risk of losing substantially its investment in the production run it had paid for upon acceptance of its quote. [ 98 ] The parties find themselves in the awkward position of having not found an elegant solution to their litigation.

Lyreco kept up its dealings with Quebec and continued to supply the briefcases as and when required. Evidence was not given as to the exact volumes delivered, the evolution of the pricing and the sourcing, if any, from an alternate supplier.

Apart from the 24 units ordered in February 2011, there is no evidence as to the volumes of the product that Bennett Little would have sold if it had gone along with the position taken by Lyreco in its letter of February 3, 2011. [ 99 ] Lyreco argues that Bennett Little, pursuant to its obligations of good faith, ought to have continued to supply Lyreco with briefcases, as and when ordered, thereby eventually running off all of the merchandise.

It argues that this would not have prevented Bennett Little from bringing an action in damages for the prejudice associated with what was essentially the extension of the contract period. [ 100 ] Lyreco concludes in its written argument that the Plaintiff did nothing by way of a good-faith effort to reconcile the interests of both parties and the mitigate the damages brought about by the situation [4] . [80 ] Par conséquent, dans l’éventualité même où la Cour conclurait à l’inexécution contractuelle de la défenderesse, celle-ci soutient devant cette Cour que la demanderesse se devait d’agir de bonne foi en permettant au contrat de poursuivre sa réalisation. [81] Il faut conclure que la demanderesse n’a fait aucun effort de bonne foi pour permettre de concilier les intérêts de part et d’autre des parties et de mitiger les dommages occasionnés par la situation. [ 101 ] The present case is different from the classic situation where a seller of goods, holding merchandise that the opposing party refuses to buy, can sell them in the market to a third party, thus mitigating its loss. [ 102 ] The briefcases were a custom-made product that could only be sold through Lyreco to Quebec.

Because Lyreco did, in fact, renew its relationship with Quebec in 2011 for another two years, Bennett Little effectively had only two choices: accept the second compromise proposed by Mr Chochoy or be left holding on to the stock without a buyer. [ 103 ] Mr Little’s concern in accepting the second compromise was twofold: he had already accepted a less detrimental compromise the previous day and Lyreco had quickly reneged on the agreement.

The new compromise implied his acceptance of the contractual breach, effectively a renunciation of his rights. [ 104 ] So the only sure aspect of the proposal was an immediate purchase of 10% of the stock in return for which he was to promise to give Lyreco the option of buying all part or none, of the stock at the fixed price. [ 105 ] With hindsight, Lyreco argues that this would have brought about a better situation for Bennett Little because Lyreco did renew its supply agreement with Quebec.

Lyreco did not tender evidence of its levels of inventory and sales after February 2011, except that it made ample proof that Quebec had, of late, been ordering less than anticipated and that Lyreco had, through its own miscalculation, kept too much stock on hand. Would Lyreco have eventually ordered all of the 240 units? Perhaps at some point, if the client still required them and the contract was effectively renewed from time to time.

But in March 2011, neither party was in a situation to know this. [ 106 ] Since it bases its argument on principles of good faith, the Court must ask, if Lyreco itself acted in good faith.

In Lyreco's own works, did Lyreco do what it could do, on a reasonable basis “pour permettre de concilier les intérêts de part et d’autre des parties et de mitiger les dommages occasionnés par la situation” [5] . [ 107 ] Initially, it did agree to do what was required to address its own interest in securing the supply that it might or might not need: by agreeing to acquire the inventory on terms more favorable than the terms Bennett Little had proposed in its tender.

But it reneged, not wanting to accept the risk of being left with stock on hand. [ 108 ] It can equally be argued that Lyreco could have, under protest of its rights as it perceived them, accepted delivery of all the stock and paid for it, reserving its right to sue for its loses, if any, if Quebec did not eventually purchase all of the goods on terms it could accept. [ 109 ] Once the litigation commenced, it could have confirmed that it would place orders for all the stock subject to possible litigation to resolve the conflict in the event that it sultured a prejudice.

Lyreco alleges: [53] Lyreco has acted and continues to act in good faith, having never sought to replace Plaintiff as a supplier for the Briefcases, trusting that the parties may surmount the present litigious dispute and resume their business relationship for the benefit of all interested parties. [6] [ 110 ] Despite this allegation, Lyreco did not propose anything concrete as a sincere attempt to permit Bennet Little to mitigate its damages and reserve its rights, though it expected Bennet Little to do something to “surmount” the conflict. [ 111 ] In the circumstances of the present case, it would not be equitable to impose an obligation of good faith on one party but not on the other. [ 112 ] If Lyreco's argument about the eventual purchase of the stock by Quebec were accurate, then the best outcome for both parties would have been the specific performance of the contract.

In that manner Bennett Little would have been paid in full and Lyreco would have had all the stock it needed, with some minimal carrying costs but the Court cannot impose that remedy if neither party seeks in its conclusions. [ 113 ] There may have been other ways to resolve the conflict that the Court can neither suggest nor impose. [ 114 ] Presumably however, despite its allegation in paragraph 53, of the Re-Amended Plea.

Lyreco must have secured another source of supply if it continued to give Quebec the option of buying the briefcases. [ 115 ] The Court concludes, on the questions of quantum and mitigation, that the measure of Bennett Little's prejudice is the loss of the purchase price of the 240 briefcases, $ 16,372.80.

[116] It could not mitigate these damages by selling the inventory to a third party, nor was it under a duty to act in renunciation of its rights byaccepting the risks that Lyreco sought to transfer to it. [117] Bennett Little has not, however, proved any additional prejudice that would justify the damages sought in the amount of $ 5,000.00. FOR THESE REASONS, THE COURT: GRANTS the action in part; RESILIATES the contract between the parties for the supply of briefcases intended for the Quebec Government; CONDEMNS the Defendant to pay the Plaintiff damages in the amount of $ 16,372.80 with interest at the legal rate and the additionalindemnity provided at

article 1619 of the Civil Code of Quebec, calculated from the date of the institution of proceedings; THE WHOLE with costs. __________________________________ DAVID L. CAMERON, J.C.Q. Me Jean DagenaisORENSTEIN & ASSOCIÉSAttorney for the Plaintiff Me Sandra DesjardinsMc CARTHY TÉTRAULT, S.E.N.C.R.L., s.r.l.Attorney for the Defendants Dates of hearing: January 30 and 31, 2013 [2] Bérubé c. Bois Rocam Inc., (QC CQ), auparagraphe 50.