Can I be compensated if a buyer strings me along under an LOI?

A letter of intent sets out the main terms of a proposed sale before the final agreements. A BDC article, quoting its senior counsel, says an LOI is not intended to be fully binding unless otherwise expressly stipulated. It adds that where the LOI so provides, it creates binding obligations on one party or the other, particularly on confidentiality and exclusivity. So any compensation for a buyer who delays or goes quiet starts with the document, not only with the buyer’s conduct.

What the LOI may give you

BDC lists clauses an LOI may contain. They include the period during which the seller agrees not to solicit or consider other offers without first speaking with the buyer, the penalties for breaching that commitment, and who bears the costs of the transaction whether or not it closes. It also lists a stipulation that the buyer may withdraw at any time if the transaction does not provide the expected gains. Check yours for each. Ask whether the exclusivity period has an end date and whether the buyer must reimburse your costs if it walks away. Our guide to the LOI to closing timeline shows where delay builds up.

Good faith in Quebec

Quebec’s Civil Code says the parties shall conduct themselves in good faith both at the time the obligation arises and at the time it is performed or extinguished (art. 1375). It also says every person has a duty to abide by the rules of conduct incumbent on him, according to the circumstances, usage or law, so as not to cause injury to another (art. 1457). Damages compensate the loss sustained and the profit of which the creditor has been deprived (art. 1611). Whether a buyer’s delay breached those duties is for a court to decide. Other provinces apply their own law, so ask a lawyer in the governing province what a claim there would need.

Records and deadlines

Keep dated copies of every request, extension and missed deadline. Ontario’s Limitations Act, 2002 says that unless it provides otherwise, a proceeding shall not be commenced after the second anniversary of the day on which the claim was discovered (s. 4). British Columbia’s Limitation Act sets a 2-year period from discovery of the claim, subject to that Act. Other provinces have their own Acts. Ask a lawyer when time would start to run in your situation before the period ends.