Commercial

A battle of the forms arises where two parties—often two companies—are negotiating the terms of a contract and each party wishes to contract on its own terms. For example, A offers to buy goods from B on A’s terms (the purchase terms), and B claims to accept A’s offer, but on B’s terms (the sales terms). At this point, there is no doubt that the parties have entered into a contract. But the question is, which terms actually apply? Purchasing, procurement and sales teams are often confronted with this situation, and if not managed properly, it can create a major blind spot in terms of risk. Some jurisdictions address this issue by applying specific principles. For instance, they may enforce the “first shot rule” or the “last shot rule”, whereby only the terms and conditions communicated first or last apply, while the others are eliminated. Other jurisdictions simply refer to contract law to settle such matters. Battle of the forms in Quebec Quebec courts simply refer to the general rules that apply to contract law, which are set out in the Civil Code of Québec1 (hereinafter the “CCQ”). Regardless of the means of communication used, a contract comes into force where and when the offeror receives acceptance of the offer. According to articles 1388 and 1389 of the CCQ, an acceptance sent to the offeror will only be deemed valid if it includes all of the essential elements of the offer. If not, the offer will be considered a counter-offer, which will be subject to the same terms and conditions, namely that the acceptance must include all of the essential elements. And if that is not the case, the response to the counter-offer will be considered a counter-counter-offer under article 1393 of the CCQ. This ping-pong situation can continue until the acceptance sent to the offeror is deemed valid. If a disagreement relating to the contract is considered “non-essential,” the courts defer to the parties’ common intention at the time the contract was drafted. Landmark decision: STMicroelectronics Inc. c. Matrox Graphics To this day, the landmark decision in this regard remains the decision in STMicroelectronics Inc. c. Matrox Graphics.2 In this particular case, there was a clause in the contract that required the buyer to acknowledge that the only courts with jurisdiction in the matter were the courts of the United States sitting in Dallas County, Texas: 19. GOVERNING LAWS: This contract will be governed by and construed in accordance with the laws of the State of Texas, and, in the case of an international sale of goods with respect to which the Convention on Contracts for the International Sale of Goods ("CISG") or any other law would otherwise apply, the Uniform Commercial Code as adopted in the State of Texas, and not CISG or any such other law, shall apply. Buyer agrees that it will submit to the personal jurisdiction of the competent courts of the State of Texas and of the United States sitting in Dallas County, Texas, in any controversy or claim arising out of the sale contract, and that service process mailed to it at the address appearing on the reverse side hereof by registered mail, return receipt requested, shall be effective service of process in any such court. On one side, STMicroelectronics Inc. was of the opinion that the above clause applied and that only the courts of the State of Texas and of the United States sitting in Dallas County, Texas, had jurisdiction. On the other, Matrox Graphics Inc. argued that it never explicitly or implicitly accepted the terms and conditions of STMicroelectronics Inc. At that point, the court examined the battle of the forms situation and had to determine whether the terms and conditions of STMicroelectronics Inc. or Matrox Graphics Inc. took precedence. The evidence shows that both parties’ representatives sincerely believed that their respective terms and conditions prevailed.3 The court concluded that the parties’ respective clauses complemented each other and could be read and applied together, as opposed to being mutually exclusive.4 The mere exchange of terms and conditions through purchase orders during each transaction was binding on the parties, and their silence regarding such terms and conditions was not exculpatory.5 Thus, the terms and conditions of both parties applied.6 The remaining question was that of the scope of Clause 5 of Matrox’s terms and conditions, which reads as follows: Terms and Conditions: . . . 5)  The Terms and Conditions will prevail notwithstanding any different or conflicting Terms and Conditions which may appear on any order acknowledgment submitted by the seller. The Court of Appeal judges indicated that this clause was open to different interpretations.7 The use of the word “prevail” in relation to conflicting clauses obviously required that there actually be a conflict between clauses. Matrox Graphics Inc. could not simply state that only its terms and conditions applied. In this case, the terms and conditions of Matrox Graphics Inc. did not include a clause regarding the courts’ jurisdiction  to hear a dispute. Thus, Clause 19 of STMicroelectronics Inc. applied.8 The court ultimately ruled that although STMicroelectronics Inc.’s Clause 19 applied, the wording of the clause was not sufficiently binding to force Matrox Graphics Inc. to litigate in Texas.9 Consequences of battles of the forms The following is a non-exhaustive list of the possible consequences of accepting the other party’s terms and conditions: A warranty that is longer (or shorter) than expected, or even no warranty at all. Unfavourable payment terms and legal proceedings in a different country in the event of non-payment. Unilateral changes to prices or requirements regarding products or services, or even potential penalties. Unforeseen transportation costs and terms and conditions. Restrictions on use or issues related to intellectual property. Deal with this issue in practice Here are a few tips to avoid confusion when applying the clauses of a given contract and prevent unintended interpretations of its terms and conditions: Negotiation of a master contract: Where there is an ongoing contractual relationship, negotiating a master contract is recommended to reduce the risk of ambiguity in the interpretation of clauses.  Addition of a clause in the purchase order: A buyer may include its terms and conditions of purchase in the purchase order and specify that only its general conditions apply to the contract. Alternatively, it may exclude any different or additional terms and conditions appearing on the seller’s documents. Although purchase orders are typically issued by the buyer, the seller may negotiate the addition of specific clauses to impose its terms and conditions of sale. Issuance of a confirmation slip: A confirmation slip is often sent upon receipt of a purchase order. It allows one party (usually the seller) to confirm acceptance of the order, while setting out the terms and conditions under which this acceptance is given. Just how effective this type of clause is really depends on how it is worded, so drafting it in clear terms that leave no room for interpretation is crucial. Outside Quebec: several possible solutions Any contract entered into outside Quebec may be subject to entirely different methods for resolving battles of the forms. In practice, there appear to be three widely accepted principles to address this issue. In Canada—with the exception of Quebec—the last shot rule is most commonly applied. According to this rule, the terms and conditions of whichever party is last to send or acknowledge the contract will apply. It is based on the general rules governing offers and acceptance. The landmark ruling in this regard was handed down by the Court of Appeal of England and Wales, which provided an essential clarification on this legal principle:10 In most cases, when there is a battle of the forms, there is a contract as soon as the last of the forms  is sent and received without objection being taken to it . . . In some cases, the battle is won by the man who fires the last shot. He is the man who puts forward the latest terms and conditions: and, if they are not objected to by the other party, he may be taken to have agreed to them . . . Another widely accepted principle is known as  the knock-out rule.  According to this rule, a contract is considered valid even where offer and acceptance do not perfectly match due to the differing general conditions. The terms governing the contract are those that are common in substance in the general conditions of both the seller and the buyer. The differing terms cancel each other out and are replaced by the default rules provided for by the applicable law. The knock-out rule applies in several countries, including the United States, France and Germany.11 The big downside is that, when applied, it generally excludes the applicable law clause, which is commonly found in both sales and purchase terms and conditions and sets out choice of forum and choice of law clauses that typically differ. The last of the three principles is called the first shot rule, whereby the terms and conditions contained in the first contractual offer prevail over subsequent ones.12 Although this principle is not as popular or frequently applied as the others, it is used and codified in Article 6:225 of the Civil Code of the Netherlands.13 Ultimately, it seems that each jurisdiction applies its own principle, with no particular one being regarded as superior to the others. Although Quebec does not apply any of the principles, it does seem to favour the last shot rule, which can lead to a ping-pong situation. In such cases, the challenge lies in determining which party sent the final version of the contract. Written with the collaboration of Me Laure Pinlon, Director of Legal Affairs at Luqia Technologies. Specifically, articles 1387 et seq. and 1425 et seq. STMicroelectronics Inc. c. Matrox Graphics Inc., 2007 QCCA 1784 STMicroelectronics Inc. c. Matrox Graphics Inc., 2007 QCCS 31, para. 26. STMicroelectronics Inc. c. Matrox Graphics Inc., 2007 QCCA 1784, para. 62. Achilles (USA) c. Plastics Dura Plastics (1977) ltée/Ltd., 2006 QCCA 1523, para. 24. STMicroelectronics Inc. c. Matrox Graphics Inc., 2007 QCCA 1784, para. 40. STMicroelectronics Inc. c. Matrox Graphics Inc., 2007 QCCA 1784, para. 51. STMicroelectronics Inc. c. Matrox Graphics Inc., 2007 QCCA 1784, para. 62. STMicroelectronics Inc. c. Matrox Graphics Inc., 2007 QCCA 1784, para. 126. Butler Machine Tool Co Ltd. v Ex-Cell-O Corp (England) Ltd. [1977] EWCA Civ 9 (25 April 1977), para. 62. Giesela Rühl, “The battle of the forms : comparative and economic observations”, (2003) 24:1 University of Pennsylvania Journal of International Economic, pp. 198 and 199. John Henry Davis, “Defense of the Battle of Forms: Curing the First Shot Flaw in Section 2-207 of the Uniform Commercial Code” (1973) 49:2 Notre Dame Law 384, p. 389. Burgerlijk Wetboek (Civil Code of the Netherlands), Book 6, Article 6:225.

In a previous Bulletin, the authors broadly outlined the legal framework that applies to export controls, as well as the challenges surrounding large language models in artificial intelligence in an era of knowledge sharing. Given that a number of legal and geopolitical developments covering various aspects of this topic took place in 2025, a brief overview is timely on the potential implications for the development of your AI projects, with a special mention of generative AI (or “GenAI”), as the new year begins. What are export controls? Export controls establish rules designed to curb the risk of transferring military, strategic and dual-use (civilian and military) goods and technologies to destinations deemed contrary to national security interests. Such technologies can take on various forms, ranging from physical hardware to technical information. In Canada, export controls are based on a licensing system, under which permits are given based on a series of items listed on the Export Control List (“ECL”) under the Export and Import Permits Act (“EIPA”). To find out if parts of your AI projects are subject to export controls, you should primarily (but not exclusively) refer to that list and to the guide prepared to better understand the list. Key events in 2025 Order SOR/2025-89  On March 7, 2025, an Order amending the ECL was published in the Canada Gazette, in an effort to include emerging technologies that are increasingly faster and more scalable, the capabilities of which raise concerns about potential adversarial military applications.1 Of particular interest in this context, subitem 5506(1) of the schedule to the ECL has been replaced by a number of paragraphs and subparagraphs. But what do these changes mean for AI projects in practice? The amendments made to subitem 5506(1) do not target AI applications (algorithms, models, data), but rather: extreme ultraviolet (“EUV”) lithography equipment, namely EUV masks and reticles making it possible to use this technology to manufacture advanced integrated circuits; cryogenic cooling equipment and ultra-sensitive amplifiers for quantum computers; advanced semiconductor materials; development and production softwares related to certain of the foregoing technologies.2 In other words, subitem 5506(1) targets the industrial toolbox used to build advanced computers, in particular through its inclusion of EUV lithography, which is used for cutting-edge integrated circuits and quantum computers that are revolutionizing the world of advanced computing. It can therefore be said that these rules affect the AI industry because of a form of hardware dependence, since tight control over these infrastructure manufacturing technologies necessarily affect the ability of a country or company to develop and operate advanced AI. In sum, these latest amendments are simply the continuation of those made in the previous year’s Order, which targeted the fields of quantum computing and advanced semiconductor manufacturing in particular (GAAFETs, representing next-generation integrated circuits).3 It has yet to be ascertained how the aforementioned orders will directly affect typical GenAI projects (model development, AI SaaS services, etc.). Those who will experience the more direct repercussions are suppliers of advanced computing equipment and businesses doing R&D on semiconductors, integrated circuits and quantum computing. Notice to Exporters No. 1159 Apart from the technical components, a certain complexity arises when we understand that the definition of a “technology” subject to export controls within the meaning of the law is meant to be broad, and that it includes technical data, technical assistance and information necessary for the development, production or use of an item appearing on the ECL. In other words, the scope of the technologies concerned goes beyond simple physical components or equipment. This is especially true given the proliferation of often cross-border cloud-based solutions, which make technical knowledge accessible digitally and circulate it far and wide. Given this context, it is appropriate to read the Guidance on the movement to and storage of controlled technology in the Cloud (Notice to Exporters No. 1159), published in November 2025 by the Government of Canada. The document was prepared to clarify instances when the use of cloud services constitutes a transfer of controlled technology under the EIPA, requiring a permit.4 In summary, the guidelines state that: it may be considered a transfer if a controlled technology is disclosed from a place inside Canada to a place outside Canada; a controlled technology is considered disclosed if it is sent from Canada and stored in a foreign location in a way that creates a reasonable possibility that a person located outside Canada would be in a position to examine that technology; a reasonable possibility means more than a mere possibility, but less than the standard of “more likely than not”; the location of servers hosting controlled technology only matters if it affects the reasonable possibility that the technology could be disclosed outside Canada; in general, it is considered a transfer when a person located outside Canada holds decryption keys or routine access rights that create more than a remote possibility that the technology may be examined, or when a cloud service provider creates an unencrypted backup copy that contains controlled technology to restore a system after an incident, and that such copy is stored on servers outside Canada where foreign administrators can access it; when cloud services are used, both the owner of the controlled technology and the cloud service provider have a degree of care and control of the technology. Thus, not only is there a risk of knowledge sharing where items directly listed on the ECL are involved (whether to manufacture them or otherwise), but the possibility of violating export controls also exists because of the interaction between cloud services and the knowledge that could be transferred (within the meaning set out above), if the cloud contains information about or relates to a controlled technology. Considerations regarding GenAI What about GenAI projects? Despite all of the above, these projects may still suffer indirect repercussions, and not only on highly technical components. You will need to exercise a certain degree of caution regarding the compliance of your GenAI projects because of the amount of information they can accumulate through the various layers of their structure. Training data There are the data used during the GenAI’s learning phase, before it is rolled out. The amount of this data can be massive, and it can be structured or unstructured. It is used to provide a knowledge base for the model and enable it to produce relevant outputs when it is given inputs. The learning phase is risky if the datasets contain controlled technical information and if the data can be regurgitated or combined when users use the GenAI. The GenAI’s weights, filters, and other operating parameters These parameters can be compared to physical control buttons—they are adjusted during the GenAI’s training and during the configuration of the solution that uses it. They determine how much each input element will influence the response and refine the model (i.e., the structure that allows the GenAI to interpret inputs and generate outputs). In the United States, weights in particular are a hot topic considering the country’s export policy, under which they can constitute key parameters for the most advanced AI models. Inputs This is the data provided by users to generate relevant outputs (e.g., text, images, structured data) when the GenAI is already rolled out. Such data is used to trigger a response or behaviour from the model. Just like with training data, inputs will be critical depending on the use made of the model and the information disclosed to obtain a response. Conditions consistent with legal requirements must be provided to prevent the model from being contaminated by sensitive data after it is rolled out, especially if it stores all the inputs provided to it for its continued learning. Outputs This is what GenAI generates in response to inputs. Outputs can be in the form of text responses or images, codes, or even data-based predictions. Given the above, it will be challenging depending on the datasets conveyed by the GenAI, to ensure that outputs do not violate export controls, as they could make it possible to indirectly obtain information the direct access to which would otherwise be prohibited. Conclusion We can imagine that the recent changes to export controls in Canada are just the beginning of an effort to address new concerns arising from this rapidly changing and ever more powerful technology. Export controls are also not devoid of a diplomatic context. For now, making AI subject to export controls seems to be the preferred mechanism to curb the exponential powers of such technology in Canada. The extent to which this will be done remains to be seen and will be interesting to follow. Government of Canada, Order Amending the Export Control List: SOR/2025-89 (March 7, 2025): Canada Gazette, Part II, Volume 159, Number 7: Order Amending the Export Control List: This is not an exhaustive list, but rather a few relevant examples that apply to advanced computing. Government of Canada, Order Amending the Export Control List: SOR/2024-112 (May 31, 2024): Canada Gazette, Part II, Volume 158, Number 13: Order Amending the Export Control List: Government of Canada, Notice to Exporters No. 1159 – Guidance on the movement to and storage of controlled technology in the Cloud (amended November 10, 2025): Notice to exporters no 1159 – Guidance on the movement to and storage of controlled technology in the Cloud

At the event, Mr. Martel will review and comment on important or interesting judicial decisions rendered in Canada and the U.S. during the second half of 2025. When: March 11, 2026 Speaker: Paul Martel He will be looking at decisions in areas such as arrangements, shareholders' meetings, shareholder agreements, oppression remedies and director liability.The presentation will be given in French. Register to the webinar

This article is part of our two-part series on what foreign buyers of, and investors in, business ventures need to know about the Charter of the French language (the “Charter”) in the context of a business transaction involving operations and employees in Quebec. The first instalment focused on French language issues during the due diligence process. Reference is made to the following hyperlink for access to part one. Continuing our exploration of the Charter in the context of merger and acquisition transactions, this part two focuses on the importance of language compliance during and after the deal-making process, from incorporating language obligations into representations and warranties to post-closing strategies for addressing compliance issues. 6. In the Deal-Making Process: Your Closing Documents Representations and warranties in transaction documents shall generally address language-related matters. For example, the target corporation may be required to represent and warrant that it has fulfilled its language obligations as imposed by the Charter. As a foreign buyer/investor, you may want to ensure that findings from the due diligence investigation are incorporated into the representations and warranties of your share or asset purchase agreement. As you prepare your closing agenda, it is of utmost importance to assess whether the principal and accessory agreements themselves will be subject to French language requirements. For example, it will be advisable to translate into French restrictive covenant agreements or intellectual property assignment agreements that will be applicable to Quebec-based employees or other agreements that may be deemed contracts of adhesion. The requirement to translate any agreement or documents following the results of the due diligence analysis can be included as a closing deliverable in a form satisfactory to the foreign buyer/investor. 7. Post-Closing: Addressing Language Compliance Beyond the Deal Obviously, not all aspects of French language compliance under the Charter will be addressed during the merger and acquisition transaction itself. Potential areas of non-compliance noted during the due diligence stage can give dealmakers a roadmap of steps to undertake after closing to mitigate risks. In recent transactions, there has been a growing need for law firms to provide post-closing support in French language matters. If a purchase price adjustment clause is included in the share or asset purchase agreement, a buyer/investor could benefit from using the costs associated with rectifying any translation defaults as a lever for the negotiation of the price to be paid. This could also include any penalties imposed by the OQLF on the target corporation. Recent amendments to the Charter have significantly increased the fines that a corporation may face for non-compliance with an order issued by the OQLF, which range from $3,000 to $30,000. These fines are doubled for a second offence and tripled for subsequent offences. If an offence persists for more than one day, it is considered a separate offence for each day it continues. Additionally, directors of the corporation are presumed to have committed the offence unless they can demonstrate that they exercised due diligence by taking all necessary precautions to prevent the offence. In cases of complaints, our experience indicates that the OQLF tends to prioritize achieving compliance rather than imposing fines when companies are responsive to complaints. This presents a positive outlook for foreign buyers/investors, as it underscores that the intent of the new Charter and its enforcement provisions is not to penalize foreign buyers/investors, but rather to reaffirm the status of the French language as the official language of work and business in Quebec. Conclusion Prospective foreign buyers/investors may question the wisdom of doing business in Quebec, given its Charterrequirements. However, achieving Charter compliance can provide a distinct competitive edge. By embracing it, you open doors to the predominantly French-speaking market in and outside Quebec, unlock opportunities in thriving sectors like mining, renewable energy and aerospace, and pave the way for lucrative partnerships with the Quebec government. However, considerations relating to the French language shall not be overlooked when it comes to due diligence or other phases of a merger and acquisition transaction as compliance is key to accessing the thriving Quebec market. Moreover, failing to address these aspects could result in various challenges to a buyer/investor’s entry into the market, such as the unenforceability of restrictive covenant agreements with key employees, potential fines, penalties and director liability. A reputational risk can also be associated with non-compliance with the Charter, in light of the media attention that surrounds this type of issue in the Quebec landscape. By adhering to the requirements of the Charter, foreign buyers/investors can position themselves as responsible corporate citizens and set the stage for successful ventures in Quebec's dynamic business landscape. As more guidance becomes available regarding the application of the new provisions of the Charter, and as we gain practical experience from upcoming transactions with foreign investor/buyers, additional instalments to this series will be published.