A bond must always be express, a resolution is generally required if a company guarantees.
The drafting of a contract should remain the prerogative of lawyers. The fact that some other professionals improvise as contract drafters can have serious consequences for their clients.
Active in the same church, a battery manager proposes to a well-off postal worker to start a battery sales company (hereinafter the "Company") using the customer base of his bankrupt former employer. The company is launched, business is progressing, and the accountant suggests signing a shareholders' agreement, prepared by him and signed by both parties. A few years pass, and the manager begins to consider his partner, the postal worker, too conservative. The two men agree to separate, and the manager, invoking the agreement, buys back the postal worker's shares and creates a digital company for this purpose.
The accountant then drafts the sales contract in which he inserts the following clause: "The purchaser (the digital company), the Company, and the manager jointly and severally undertake to pay the agreed price."
Following this transaction, the manager finds an investor, and the Company becomes very prosperous. After making an initial payment, the digital company stops reimbursing the postal worker. The postal worker appeals to the Court of Appeal and requests, among other things, that the Company, as a guarantor, reimburse him.
The Court of Appeal overturns the decision of the Superior Court and concludes:
- that the Company never intervened as such in the sales agreement;
- that there was never a resolution or expression of will on the part of the Company;
- that even assuming the existence of the guarantee, it would contravene Article 123.66 of the Quebec Companies Act.
Thus, a guarantee must always be express, a resolution is generally necessary if a company guarantees, and furthermore, as long as the Quebec Companies Act is not amended, any guarantee by a company must comply with the aforementioned Article 123.66.
The drafting of a contract remains a significant action with consequences. Some professionals may count the goats well, only lawyers are able to keep them and adequately protect them.
*CA Montreal 500-09-015598-055
