Can I be held to a price only agreed informally in an LOI?

A price named in an LOI can look like a number that is open to renegotiation once the buyer has seen your books. Whether it is depends on the wording around it and on what the two sides said to each other. This page covers Quebec law only. Other provinces have their own contract rules, which this page does not describe, so confirm with a lawyer licensed where the business is based.

How a contract forms in Quebec

The Civil Code of Québec says a contract is formed by the sole exchange of consents between persons with capacity to contract. The exception is where the law requires a particular form as a condition of formation, or the parties subject formation to a solemn form. Éducaloi describes the test as a meeting of the minds on what each party is supposed to do, and says most contracts do not have to be in writing: a verbal agreement or an email exchange is enough. A price written down informally is not outside that test.

Promises, offers and time limits

The Code also covers promises to contract. An offer made to a determinate person is a promise to enter into the proposed contract from the moment the offeree clearly indicates that they intend to consider the offer and reply within a reasonable time, or the time stated. A promise to enter into a contract is not subject to the form the contract itself needs. So if you put a price to a buyer and they clearly indicate that they will consider it and reply, your offer becomes a promise to enter into the proposed contract.

Words that protect a seller

• State that the price is indicative and subject to due diligence and a definitive agreement.
• List what the price assumes, such as the stock level, debt and working capital at closing.
• Say that no sale obligation arises until a definitive agreement is signed.
• Date the price, and say it lapses if the buyer does not meet its conditions.

Keep your emails consistent with the LOI. Because Éducaloi says an email exchange can form a contract, a message that calls the price final could cut against careful wording. Éducaloi also says a written contract is often a good idea even where one is not required, because it makes the terms easier to prove. See what happens between the LOI and closing.