Quebec court absolves corporate directors of liability in breach of contract dispute

Individuals acted for corporation, not themselves, in carrying out contract: Court
|employmentlawtoday.com|Last Updated: 01/13/2011

Directors or officers who act on behalf of a corporate entity don’t have personal liability for the corporation’s breach of contract absent any individual misconduct independent of the contractual relationship, the Quebec Superior Court has ruled.

BBR Productions, a Montreal-based film production company, was sued for breach of contract. Some of the company’s directors or officers, who represented BBR in its commercial transactions such as the contract in question, were included in the lawsuit as co-defendants.

The individuals filed a motion to have their names removed as co-defendants, arguing they should not be personally liable for carrying out their responsibilities as agents of the corporation.

The court noted it was important to be careful that individuals aren’t included in commercial lawsuits simply as a way to put pressure on them to come to a quick settlement. Only the parties of a contract can be held liable for breaches of that contract and individuals who act on behalf of an organization would only be liable in a lawsuit if they acted outside of the contract and breached a legal obligation that was independent of it, said the court. Since a corporation can only act through its directors or officers, its liability within the scope of a contract include those individuals.

The court found the directors and officers of BBR acted only on behalf of the corporation, not themselves, in carrying out the contract. As a result, there was no basis for them to be included individually as co-defendants with the corporation.

“The entire cause of action is based on the acts that the corporate defendants are accused of having committed, which acts were carried out by the individual defendants who represented them, whether as a manager, director or shareholder,” said the court. “All the alleged actions derive from and are a consequence of the contractual relationship.”

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