The Outer Limits Of Late Payment And Collection Fees In Quebec

Introduction

A persistent concern in Quebec has been whether interest or late payment clauses could be considered abusive under civil law in the context of the rules of interpretation applicable to contracts of adhesion¹ (as franchise agreements are normally considered) or by being re-characterized as penalty clauses that may be reduced by the court if considered abusive in any contract².

The Court of Appeal of Quebec has had, in a few recent decisions, the opportunity to provide some guidance with respect to the enforceability of a late payment interest clause when coupled with a collection fee penalty clause. We will examine the recent decision of Diamantopoulos ("Diam") v. Construction Dompat Inc.³ ("Dompat"), in which the Court also relied upon another of its earlier decisions⁴ regarding similarly worded provisions.