In Quebec, if there is an arbitration clause in a contract, the parties to a contract must comply with the rules established therein.
It is not uncommon for people who associate and sign a unanimous shareholder agreement to later refuse to honor the agreement on various pretexts.
Two brothers-in-law who hold equal shares in a company sign a unanimous shareholder agreement. One of them, disabled following an accident, becomes unable to fulfill his obligations towards the company.
The unanimous agreement provides that any shareholder who is prevented from fulfilling his duties for a period of two years due to illness must irrevocably offer all his shares to his co-shareholder.
Two years pass and the "disabled" receives a written acceptance of the automatic offer provided for in the shareholder agreement from the "healthy" one. Refusing the proposed price, the "disabled" invokes the arbitration clause provided in the agreement. The arbitrator, while recognizing the validity of the offer, sets the value of the shares at more than four times the price offered by the "healthy" one. The latter approaches the Court* and requests the cancellation of the sale. The judge rejects the claims of the "healthy" one since "accepting such a request would amount to denying the existence of the unanimous shareholder agreement and the arbitration clause aimed at resolving disputes".
When there is an arbitration clause, should not the parties comply with the established rules, the first being to respect the arbitrator's mandate. Thus, the claims of the "healthy" one were invalidated, and the "disabled" is all the better off.
*C.S. 150-05-002774-018, 2002-02-06
