On June 30, 2026, the Court of Appeal rendered a decision (the “Decision”)[1] confirming that the price of an absolute fixed-price contract may not be reduced on the basis that the client waived the performance of certain work, and that the contractor can lose the benefit of the term under a pay-when-paid clause characterized as an obligation subject to a term.

FACTS

In 2008, following a call for tenders, the Société de transport de Montréal (“STM”) awarded Ardec Construction inc. (“Ardec”) a contract for the refurbishment of two elevators. In order to complete a significant portion of that work, Ardec entered into a subcontracting agreement with Ascenseurs Maxi inc. (“Maxi”) in the amount of $1,190,000 (the “Contract”).

The Contract contained two clauses that would prove central to the ensuing dispute between Ardec and Maxi: one concerning Maxi’s obligations, and the other concerning the exigibility of payments:

• Vous devez coordonner vos travaux avec les plans de mécanique, structure et d’architecture et respecter les conditions générales, complémentaires et particulières du contrat de la STM (“Obligations Clause”)
• Termes : Dans les 10 jours suivant la réception du paiement de la STM et selon les termes de la STM et selon les retenues prévues dans le document d’appel d’offres. (“Pay-When-Paid Clause”)

Initially, the work was to be carried out from December 1, 2018, to March 1, 2020. However, the work did not begin until February 2019 and was not completed until August 2021, owing to delays for which responsibility was disputed between Maxi and Ardec.

During the Contract, STM removed certain work from the Contract’s scope. STM also withheld certain amounts due to project delays, such that Ardec justified its own refusal to pay Maxi by relying on the Pay-When-Paid Clause.

On November 1, 2021, Maxi commenced proceedings before the Superior Court seeking payment of the outstanding balance allegedly due under the Contract.

THE TRIAL JUDGMENT

The Superior Court granted Maxi’s action in part. [2] The Trial judgment addressed a variety of issues[3], including Ardec’s entitlement to a reduction of the Contract price in light of STM’s removal of certain work[4], as well as the effect of the Pay-When-Paid Clause[5].

The Superior Court held that although STM had removed  work to be performed which initially fell within the Contract’s scope, Ardec could not claim a reduction of the Contract price. The Court emphasized that the parties were bound by a fixed-price contract, which it characterized as absolute given that it did not provide for any possibility of adjusting the price in response to changes to the work initially contemplated[6]. This therefore precluded Ardec from obtaining a reduction of its payment obligation, even though certain work initially contemplated had not been performed by Maxi as a result of STM’s instructions[7].

The Superior Court also held that the Pay-When-Paid Clause created an obligation subject to a term[8], rather than a condition such that Ardec’s obligation to pay Maxi was not contingent upon Ardec first receiving payment from the STM. The Court emphasized that, the payment by the STM, the event that the parties had considered certain, failed to occur as a result of the conduct of Ardec and the STM, Maxi was entitled to demand payment from Ardec[9].

THE COURT OF APPEAL’S DECISION

The Court dismissed Ardec’s appeal. Ardec appealed the Trial judgment on three grounds[10], including the following two:

1. First, Ardec argued that the Superior Court erred in concluding that article 2109 C.C.Q. applied and in finding that Maxi was entitled to the amounts claimed for work, parts and services that it had neither performed nor supplied[11].

In dismissing this first ground of appeal, the Court of Appeal emphasized that the Obligations Clause which referred to STM’s instructions did not operate so as to incorporate into the Contract the price-reduction mechanisms set out in the contract between STM and Ardec[12]. The wording of that clause did not amount to an express provision allowing the Contract price to be modified, as required by case law[13].

2. Ardec further argued that the Superior Court erred in declining to apply the Contract’s Pay-When-Paid Clause[14].

The Superior Court had indeed found that Ardec had compensated amounts it considered owing from the STM, then dismissing Ardec’s contention that the STM had withheld payment of a portion of the contractual balance because of delays allegedly attributable to Maxi.[15] The Court rejected this second ground of appeal, noting that, in a case such as this one where the prolonged delay is not attributable to the subcontractor, the contractor may lose the benefit of the term provided for in the pay-when-paid clause[16].

CONCLUSION AND COMMENTARY

The Decision first reiterates how the characterization of a construction contract as an absolute fixed-price contract may crystallize the parties’ respective positions, notwithstanding the occurrence of changes in the scope of the work along the way. In this case, for example, the contractor was unable to obtain a reduction of its obligation to pay, even though the subcontractor did not perform certain work that had initially been contemplated, but subsequently withdrawn by the client.

The Decision also serves as a reminder of the importance of the wording of a pay-when-paid clause, which may have significant consequences for the various stakeholders involved in a construction project. Depending on its wording, such a clause may characterize payment by the client as either a conditional obligation or an obligation subject to a term, which will have a considerable impact on the exigibility of the contractor’s payment obligation toward the subcontractor, in the event of the client’s default[17].

It will be interesting to monitor how the Decision is applied by Quebec courts going forward, and in particular how it will fit within the substantial body of case law dealing with pay-when-paid clauses.

[1] Ardec Construction inc. v. Ascenseurs Maxi inc., 2026 QCCA 935 [Decision].

[2] Ascenseurs Maxi inc. v. Ardec Construction inc., 2024 QCCS 5048 [Trial judgment].

[3] These included, in particular, the Contract price, the precise scope of Maxi’s obligations and the conformity of their performance, Ardec’s failure to pay Maxi all amounts owing under the Contract, responsibility for the project delays in light of evidence, and Maxi’s potentially wrongful publication of a notice of legal hypothec.

[4] Trial judgment, par. 84 – 95.

[5] Ibid., par. 171 – 179.

[6] Ibid., par 87 – 89; Art. 2109 C.c.Q.

[7] Ibid.

[8] Art. 1508 C.c.Q.

[9] Art. 1510 C.c.Q.; Trial judgment, par. 178 – 179.

[10] As a third ground of appeal, Ardec argued that the Superior Court erred in dismissing its claim arising from Maxi’s publication of the legal hypothec.

[11] Decision, par. 14 – 25.

[12] Ibid., par. 22.

[13] Ibid., par. 23 – 25, quoting Ville de Saguenay v. Construction Unibec inc., 2021 QCCA 560, par. 83-84 and Marc Bolduc inc. v. Société québécoise du cannabis, 2026 QCCS 1727, par. 32.

[14] Decision, par. 26 – 34.

[15] Ibid., par. 30 – 31.

[16] Ibid., par. 33 – 34.

[17] Art. 1497 C.c.Q.; Trial judgment, par. 175 – 179; Plomberie KRTB inc. v. Construction Citadelle inc., 2015 QCCS 3103, par. 17, 19 – 20, 24.