If I sign an LOI, am I actually committed to selling?

A letter of intent is a document, not a category of law, so signing one does not settle your position by itself. The wording, read with provincial law, does. Check whether yours says that everything is non-binding until a purchase agreement is signed, or makes particular clauses binding at once. Read it as a seller would read any contract: clause by clause, asking what each one obliges you to do and for how long.

Read the wording clause by clause

Look for a statement of which sections are binding and which are not. Check whether the price and terms are said to be subject to a definitive agreement and to the buyer’s due diligence, whether an exclusivity or no-shop period restricts you from talking to other buyers, and whether the letter expires. For how the two documents differ, see LOI vs term sheet and what an exclusivity clause does.

What the Civil Code of Québec adds

Article 1396 says a mere promise is not equivalent to the proposed contract. However, where the beneficiary of the promise accepts it or takes up the option, both the beneficiary and the promisor are bound to enter into the contract, unless the beneficiary decides to enter into the contract immediately. Under article 1397, a contract made in violation of a promise to contract can be set up against the beneficiary, without affecting the beneficiary’s remedy in damages against the promisor and anyone who contracted in bad faith with the promisor. Article 1458 says every person has a duty to honour contractual undertakings, and article 1375 requires the parties to act in good faith when an obligation arises and when it is performed or extinguished.

Signing electronically

In Ontario and British Columbia, using electronic means does not by itself make a contract invalid. British Columbia’s Electronic Transactions Act says a contract is not invalid or unenforceable solely because information or a record in electronic form was used in its formation, and Ontario’s Electronic Commerce Act, 2000 says a contract is not invalid or unenforceable by reason only of being in electronic form, and that an offer, its acceptance or any matter material to formation may be expressed electronically unless the parties agree otherwise. Neither Act requires a person to use electronic form without consent, and both list documents they do not apply to.

Before you sign

• Ask your lawyer to mark which clauses bind you today.
• Confirm what you may and may not do during any exclusivity period.
• Ask what happens to the confidentiality clause if the deal does not proceed.