Restitution of Performances in Quebec Civil Law

Overview

When a juridical act is retroactively annulled, the parties must be returned to the positions they occupied before the act was formed. The regime that governs this unwinding is called restitution of performances (restitution des prestations), codified in articles 1699 to 1707 of the Civil Code of Quebec (Code civil du Québec, CCQ). These provisions establish when restitution arises, how it operates between the original parties, and how it affects third parties who may have acquired rights in the interim. The rules are suppletive: the parties may contractually agree to different arrangements. Particular rules tied to specific contexts, such as consumer protection or insurance, may supplement or displace this general framework.

Learning Objectives

After reading this article, the reader should be able to:

• Identify the circumstances that trigger an obligation to make restitution under Quebec civil law.
• Distinguish restitution in kind (en nature) from restitution by equivalence (par équivalent) and explain when each applies.
• Apply the rules governing total and partial loss of property subject to restitution, including the relevance of good faith (bonne foi) and superior force (force majeure).
• Explain the judicial discretion granted by art. 1699 CCQ to modify or refuse restitution where it would produce an undue advantage.
• Describe how ancillary indemnities, fruits, revenues, and disbursements are treated within the restitution framework.
• Analyze the effects of restitution on third parties, including protections afforded to acquirers in good faith.

Key Concepts and Definitions

• Restitution of performances (restitution des prestations): The obligation to return what was received under a juridical act that has been retroactively annulled, resolved, or otherwise rendered without effect.
• Restitution in kind (restitution en nature): Returning the actual property received to the person entitled to restitution.
• Restitution by equivalence (restitution par équivalent): Returning the monetary value of what was received, where restitution in kind is impossible or would cause serious inconvenience.
• Good faith (bonne foi): The honest belief that one's position is lawful; directly affects the scope of restitution obligations and the valuation rules that apply.
• Superior force (force majeure): An unforeseeable, irresistible, and external event that renders performance impossible and may excuse the debtor from restitution in kind.
• Undue advantage (avantage indu): A benefit flowing from the application of restitution that the court considers unjust for one party to receive.
• Theory of risks (théorie des risques): Rules governing which party bears the loss when performance becomes impossible through no fault of either party.

Circumstances Giving Rise to Restitution

Article 1422 CCQ creates the obligation to make restitution, and art. 1699 CCQ specifies the circumstances in which the regime applies. Several situations may trigger this obligation:

• Annulment (nullité) of a contract, which retroactively destroys the juridical act (art. 1422, al. 2 CCQ).
• Resolution (résolution) of a contract for non-performance, which also operates retroactively (art. 1606, al. 1 CCQ).
• Fulfilment of a resolutory condition (condition résolutoire), which unwinds the contract from the date of formation (art. 1507, al. 2 CCQ).
• Impossibility of performance due to superior force, governed by the theory of risks (art. 1694, al. 1 CCQ).
• Receipt of a thing not due (réception de l'indu), where property or payment is received without right or through error (art. 1492 CCQ).

The regime also covers any situation where, by operation of law, a person must return what was received "without right or by error."

The Civil Code of Quebec did not retain the Latin maxim nemo auditur propriam turpitudinem allegans (no one is heard when invoking their own turpitude). Even where a contract is annulled for immorality, restitution applies. Refusing restitution would compound one injustice with another by producing unjust enrichment of the party who retains the performance.

Judicial Discretion Under Article 1699

Under art. 1699, al. 1 CCQ, the court is bound to order restitution whenever a juridical act is retroactively destroyed. In exceptional cases, art. 1699, al. 2 CCQ grants the court discretion to refuse restitution, or to modify its scope or conditions, where restitution would confer an undue advantage (avantage indu) on one party.

An undue advantage exists when one party receives a profit, gain, or benefit that a reasonable person would consider unjust. It may also arise from the blameworthy conduct of the creditor of the restitution obligation. The burden of proving the undue advantage falls on the debtor of the restitution obligation.

This discretionary power must be distinguished from the calculation of fair value under articles 1701 and following CCQ. The court first applies the general restitution rules to determine the value of the property or service to be returned. Only after completing that assessment does the court consider whether an undue advantage results. The discretion under art. 1699, al. 2 CCQ is exercised on a case-by-case basis, not according to automatic rules or pre-established formulas.

Unilateral and Bilateral Restitution

Restitution may be unilateral or bilateral. In a case of receipt of a thing not due, only the recipient has an obligation toward the payor. In bilateral restitution, such as that following the annulment of a synallagmatic contract (contrat synallagmatique), each party must return what it received from the other. Where the conditions for compensation (compensation) under art. 1672 and 1673 CCQ are met, the court offsets the two reciprocal debts.

A party invoking the restoration of the prior state must itself offer to make restitution of the performances it received, unless the other party's fault renders restitution impossible. A debtor of the restitution obligation must use the mechanism of real tender and deposit (offres réelles et consignation) prescribed by art. 1573 CCQ and following.

Restitution of performances must also be distinguished from reparation of civil fault under art. 1611 CCQ. Reparation requires proof of injury (préjudice) and operates under the principle of full compensation (réparation intégrale). In contractual non-performance, reparation typically takes the form of damages. Restitution, by contrast, requires returning what was received; it does not engage the question of compensating a loss.

Restitution Between the Parties

Restitution in Kind

Article 1700 CCQ establishes the baseline rule: restitution is made in kind by returning the actual property received. Restitution by equivalence is permitted only where restitution in kind is impossible or would cause serious inconvenience (inconvénient sérieux). The burden of proving impossibility or serious inconvenience rests on the debtor of the restitution obligation. A mere difficulty does not qualify; considerable transport costs, for example, may represent a serious inconvenience.

Restitution by equivalence is also required where the nature of the contract precludes return in kind. Contracts of successive performance (contrats à exécution successive), such as leases (louage), service contracts, or loan agreements, involve performances that have been consumed over time and cannot be physically returned. Similarly, construction contracts involve labour and materials that are inherently non-returnable. In these situations, the non-monetary performance is valued and returned in money.

Example: A court annuls a lease. The tenant cannot return the months of occupation already enjoyed. The value of that occupation is assessed and forms the basis for restitution by equivalence.

The impossibility of restitution in kind never bars annulment or resolution, because restitution by equivalence always remains available, subject only to the judicial discretion under art. 1699, al. 2 CCQ.

Restitution by Equivalence Attributable to the Debtor

When restitution in kind is impossible for reasons attributable to the debtor rather than to superior force, different rules apply depending on whether the loss is total or partial. The Code distinguishes these two scenarios to calibrate the debtor's obligation according to the severity of the loss and the debtor's good or bad faith.

Total Loss of the Property

Article 1701, al. 1 CCQ addresses total loss or alienation of property (sale, exchange, giving in payment, donation) not resulting from superior force. The article distinguishes two categories:

1. Debtor in good faith: The debtor must return the lesser of the property's value at the time of its loss or alienation, the time of restitution, or the time of receipt.
2. Debtor in bad faith or whose fault caused the restitution (for example, through fraud or dol): The debtor must return the highest of those three values.

The debtor in bad faith therefore bears the full risk of fluctuation in the property's value. This rule operates as a penalty for the party whose misconduct necessitated the restitution or who knew the obligation to return might arise.

Example: A sells a painting to B through fraud. The painting was worth $5,000 at the time of sale and $8,000 at the time of annulment. B, who is in good faith and has resold the painting, must return the lesser of these values ($5,000). Had B been the fraudulent party, B would owe the higher value ($8,000).

Partial Loss of the Property

Under art. 1702 CCQ, when property subject to restitution has suffered deterioration or depreciation not resulting from superior force, the debtor must return the property in its present state and compensate the creditor for the loss. An exception exists where the deterioration results from normal use of the property, in which case no compensation is owed for the depreciation.

Example: A court resolves a sale of equipment. The buyer returns the equipment, which has deteriorated beyond normal wear. The buyer compensates the seller for the excess deterioration. As a result, the buyer's monetary restitution from the seller is reduced by the amount of that compensation.

Article 1702 CCQ does not expressly address the debtor in bad faith. Its principle therefore applies regardless of the debtor's state of mind, whether both parties acted in good faith or the debtor acted in bad faith.

A more difficult scenario arises when the debtor of restitution acted in good faith and is the victim of the other party's bad faith. Under art. 1702 CCQ read in isolation, the good-faith debtor bears the loss from deterioration. This produces an unjust outcome: the party at fault profits from the depreciation of property it has no right to retain. Article 1699, al. 2 CCQ provides a corrective mechanism. Because requiring restitution of a depreciated property without adjustment would confer an undue advantage on the party at fault, the court may require that party to assume the loss. The victim of fraud, in practical terms, should receive full restitution of the monetary consideration originally paid.

Unlike art. 1701 CCQ, art. 1702 CCQ is silent on the moment at which the loss is calculated. The valuation framework of art. 1701 CCQ (the time of loss, restitution, or receipt) could be applied by analogy to cases of partial loss.

Restitution by Equivalence Following Superior Force

When restitution in kind is impossible because of superior force, meaning the impossibility is in no way attributable to the debtor, the Code again distinguishes between total and partial loss. The debtor bears the burden of proving superior force (art. 1470 CCQ).

Total loss: Under art. 1701, al. 2 CCQ, a debtor who loses the property through superior force is released from the obligation to make restitution. If the debtor receives or has the right to receive an indemnity for the loss (for example, insurance proceeds), the debtor must transfer that indemnity or the right to claim it to the creditor. Where the debtor acted in bad faith, or the debtor's fault caused the restitution, the debtor must make restitution by equivalence despite the superior force, unless the property would also have perished in the creditor's hands.

For synallagmatic contracts retroactively destroyed where superior force renders restitution impossible, the theory of risks under art. 1694, al. 1 CCQ determines the fate of the correlative obligation. The debtor released from restitution bears the risk of loss, and the other party is also released from its own obligation to return what it received.

Partial loss: Where superior force causes only partial loss, the debtor returns the property in the condition it is in on the day of restitution (art. 1562 CCQ). The theory of risks under art. 1694 CCQ governs the creditor's correlative obligation: the creditor reduces its own restitution proportionally to what it receives. Where the debtor of restitution is the victim of the other party's bad faith, the court may grant the victim full restitution of its monetary consideration under art. 1699, al. 2 CCQ.

Ancillary Indemnities

The rules from Book Four of the CCQ (Property) governing possessors in good or bad faith apply to disbursements (impenses) made to property subject to restitution (art. 1703, read with art. 931 to 933 CCQ). Necessary disbursements are reimbursed regardless of good or bad faith. Useful disbursements may be reimbursed or give rise to removal rights depending on the possessor's status. Purely voluntary disbursements are generally not reimbursed.

Fruits and revenues: Under art. 1704 CCQ, a debtor of restitution keeps the fruits and revenues (fruits et revenus) produced by the property and bears the costs incurred to produce them. A debtor in bad faith, or one whose fault caused the restitution, must return the fruits and revenues and compensate the creditor for the enjoyment (jouissance) the property provided, after offsetting production costs.

Enjoyment of the property: Article 1704 CCQ also addresses the debtor's enjoyment of the property itself. For contracts of immediate performance (exécution immédiate) where the principal obligation does not concern enjoyment of the property, such as a sale or exchange, a good-faith debtor need not account for enjoyment. For contracts of successive performance, such as a lease (louage) or loan (prêt), the debtor must return the value of the use of the property. If the property was susceptible to rapid deterioration or the debtor acted in bad faith, the debtor must return the value of the enjoyment rather than merely the value of use.

Costs of restitution: Under art. 1705 CCQ, the costs of restitution are borne by the parties in proportion to the value of the performances they return to each other. If one of the contracting parties acted in bad faith (for example, through fraud), that party assumes all restitution costs.

Restitution Limited to Enrichment

Minors (mineurs) and persons of full age under tutorship (majeurs en tutelle) benefit from a special protective rule: they are required to make restitution only to the extent of their enrichment (enrichissement), under art. 1706 CCQ. The burden of proving the enrichment lies with the other contracting party.

Example: A minor sells property without authorization for $2,000 and spends $1,000 on ordinary living expenses. If the sale is annulled, the minor must return only the remaining $1,000. The other party must return the property received in full.

Several qualifications apply to this protection:

• It covers minors and persons of full age under tutorship only, excluding cases of natural incapacity (inaptitude naturelle) without a formal protective regime.
• The protection is set aside where the impossibility of restitution results from the intentional or gross fault of the protected person.
• It applies only when restitution in kind is impossible. If the property can be returned in kind, the general rules govern.
• Where there is no enrichment at all, no restitution is owed.

For juridical acts performed before a protective regime was established but subsequently annulled, the protective rule of art. 1706 CCQ applies retroactively. Articles 284 and 290 CCQ, which protect persons of full age under curatorship or tutorship retroactively, support this interpretation.

Effects of Restitution on Third Parties

Third parties who acquired rights through a transaction that is retroactively annulled cannot, in principle, hold greater rights than their predecessors in title (auteurs). They are, therefore, ordinarily affected by the annulment. The Code, however, introduces distinctions based on the character of the third party's transaction and the third party's good or bad faith.

Alienation for Value

Under art. 1707, al. 1 CCQ, alienations for value (aliénations à titre onéreux) made to third parties in good faith are opposable to the person entitled to restitution. Restitution in kind from the third party is therefore impossible. The creditor receives restitution by equivalence from the debtor (the third party's predecessor in title), who must return the lesser value under art. 1701 CCQ.

A third party in bad faith, by contrast, is not protected. The third party is subject to restitution in kind: the property must be returned.

Example: A sells a car to B, and B resells it to C. If A obtains annulment of the first sale and C purchased in good faith for value, A cannot recover the car from C. A receives monetary restitution from B.

Gratuitous Alienation

Gratuitous alienations (aliénations à titre gratuit), such as donations, receive less protection. They are not opposable to the person entitled to restitution, even where the third party acquired in good faith. The third party must return the property, subject only to the rules of prescription (prescription) under art. 2910 CCQ and following.

Acts Other Than Alienation

Under art. 1707, al. 2 CCQ, acts other than alienation concluded for the benefit of third parties in good faith are opposable to the creditor of restitution. Restitution in kind by the debtor to the creditor may still proceed, but the creditor must respect the rights granted to the third party.

Example: B leases an apartment from A under a contract that is later annulled. If B is a tenant in good faith, the person who receives restitution of the immovable must honour B's lease (art. 1886, 1887, and 1937 CCQ). If B is a tenant in bad faith, the lease is inopposable to the creditor of restitution, and B loses the right to occupy the premises.

This distinction preserves third-party arrangements made in good faith while denying protection to bad-faith actors.

Practice Checklist

• Confirm that a circumstance giving rise to restitution exists (annulment, resolution, resolutory condition, superior force, receipt without right).
• Determine whether restitution is unilateral or bilateral.
• Assess whether restitution in kind is possible or whether serious inconvenience warrants restitution by equivalence.
• If restitution is by equivalence, classify the loss as total or partial, and determine whether it is attributable to the debtor or to superior force.
• Identify the good or bad faith of each party and apply the appropriate valuation rule (least or greatest value) under art. 1701 CCQ.
• For partial loss, apply art. 1702 CCQ and consider the corrective mechanism of art. 1699, al. 2 CCQ where one party acted in bad faith.
• Account for ancillary indemnities: fruits, revenues, enjoyment, disbursements, and restitution costs under art. 1703 to 1705 CCQ.
• Determine whether any party is a protected person (minor or person of full age under tutorship) entitled to limited restitution under art. 1706 CCQ.
• Assess the effects on third parties: classify the transaction as alienation for value, gratuitous alienation, or other act, and verify good or bad faith under art. 1707 CCQ.
• Consider whether restitution would confer an undue advantage on one party, warranting judicial intervention under art. 1699, al. 2 CCQ.
• Where required, use real tender and deposit (art. 1573 CCQ and following) to formally demonstrate readiness to make restitution.

Glossary

• Alienation (aliénation): Transfer of ownership of property to another person.
• Compensation (compensation): Extinction of reciprocal debts by operation of law, setting one off against the other.
• Debtor of restitution (débiteur de la restitution): The person who is obligated to return what was received.
• Disbursements (impenses): Expenditures made on the property of another, classified as necessary, useful, or voluntary.
• Enjoyment (jouissance): The use and benefit derived from property.
• Enrichment (enrichissement): The measure of benefit retained by a protected person, which caps their restitution obligation.
• Fruits and revenues (fruits et revenus): Income or produce generated by property.
• Good faith (bonne foi): Honest belief in the lawfulness of one's position.
• Minor (mineur): A person who has not reached the age of majority (18 in Quebec).
• Nullity (nullité): Annulment of a juridical act, rendering it void retroactively.
• Real tender and deposit (offres réelles et consignation): A formal mechanism for offering performance when the creditor refuses acceptance.
• Receipt of a thing not due (réception de l'indu): Receiving property or payment without right or through error.
• Resolution (résolution): Retroactive destruction of a contract for non-performance.
• Restitution by equivalence (restitution par équivalent): Monetary restitution of the value received.
• Restitution in kind (restitution en nature): Physical return of the actual property received.
• Superior force (force majeure): An unforeseeable, irresistible, and external event that excuses performance.
• Synallagmatic contract (contrat synallagmatique): A bilateral contract creating reciprocal obligations between the parties.
• Theory of risks (théorie des risques): Rules governing which party bears the loss when performance becomes impossible.
• Tutorship (tutelle): A protective regime established for minors or incapable persons of full age.
• Undue advantage (avantage indu): A benefit from restitution that is unjust for one party to receive.

References

• Civil Code of Quebec (CCQ), art. 284, 290, 931 to 933, 1422, 1470, 1492, 1507, 1562, 1573, 1606, 1672, 1673, 1694, 1699 to 1707, 1886, 1887, 1937, 2910.
• Baudouin, J.-L., Jobin, P.-G., and Vézina, N., Les obligations, 7th ed.
• Goubau, D., on the retroactive application of protective measures under art. 1706 CCQ.

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The content of this article is intended for educational purposes only. It does not constitute legal advice. For advice specific to your situation, consult a qualified Quebec legal professional.