Can a seller cancel an LOI if the buyer misses a milestone?

This page covers Québec’s Civil Code; other provinces apply their own law. Whether a missed date lets the seller end a letter of intent starts with the LOI itself. Look for a stated expiry, a termination clause, and whether the milestone is an obligation or only a target.

Is a missed date a default

The Code says a debtor is in default by the sole operation of law where performance would have been useful only within a certain time that the debtor let expire. A debtor is also in default where the debtor has made clear an intention not to perform. A date that is only an aim may not create that obligation, which is why the wording matters.

Ending without going to court

A contract may be resolved or resiliated without judicial action where the debtor is in default by operation of law, or has failed to perform within the time set in a demand putting the debtor in default. A seller who is unsure that the default is automatic can send a demand; the Code says it must be in writing and allow the debtor sufficient time for performance. Keep a copy and proof of delivery.

The limit for minor defaults

Despite any stipulation to the contrary, the Code says a creditor is not entitled to resolution or resiliation if the debtor’s default is of minor importance, unless, for an obligation of successive performance, the default occurs repeatedly. Ask a lawyer whether a given delay could be treated as minor before relying on it.

What else moves with the LOI

A lender may rely on the letter. BDC lists a letter of intent and an expected closing date among what it asks for before a buyer applies. Ask your lawyer how a notice could affect the buyer’s financing before sending it. The page on the steps between LOI and closing shows where milestones fall, and backing out after signing an LOI covers the buyer’s side.