Executive Summary: Key Legal and Evidentiary Issues

• Interpretation of a letter of intent (LOI) clause on expense reimbursement where the share purchase transaction did not close.
• Characterisation of which party effectively “backed out” of the deal when the buyer shifted from a share purchase to an asset purchase on different terms.
• Significance of major outstanding points (exclusion of inventory and accounts receivable) in determining whether a binding agreement was ever reached.
• Use of contractual interpretation principles for an incomplete contract, including the parties’ common intention and norms governing the sale of a business.
• Assessment of documentary evidence, including the LOI and the seller’s May 13 email, to decide whether the reimbursement clause was triggered.
• Allocation of costs in small claims proceedings where the plaintiff’s contractual reimbursement claim fails entirely.

Facts of the case

Les Aliments Ares inc. (Ares), the plaintiff, sought to acquire a seafood distribution business held by SeaRay Seafoods inc., whose shares were owned by Investissements Jobini inc. (Jobini), the defendant. The parties negotiated over more than a year about the possible sale of the company. On 19 December 2023, they signed a letter of intention (LOI) drafted by Ares’s legal counsel, setting an intended purchase price of $2,500,000 for the company’s shares, payable over 36 months. The LOI reflected a contemplated share purchase transaction, not an asset deal.
The LOI contained a key provision under the heading “Definitive Agreement.” The parties agreed to negotiate in good faith to finalize the binding documents by 29 February 2024, referred to as the “Ultimate Date.” The clause provided that if no binding agreement was reached by that date “due to Sellers electing to back out of the deal,” the seller would pay the buyer’s actually incurred fees, including consulting and travel expenses, related to the negotiations. It also stated that if no binding agreement was reached before the Ultimate Date, the LOI would expire with no further obligations except those in that section and the confidentiality section, unless the parties agreed in writing to extend it month to month.
The deadline for signing the transaction documents was later pushed back to the end of March 2024 to allow Ares to complete its due diligence. On 15 March 2024, Ares presented an offer to Jobini. However, this offer took the form of an asset purchase agreement rather than a share purchase agreement, on altered economic terms. Jobini viewed this as a significant departure from the basic structure set out in the LOI.
On 13 May 2024, Jobini’s Director of Operations, Isabelle Remy, sent an email to Ares explaining Jobini’s position. She wrote that Jobini had been “extremely disappointed” when Ares “backed out of the transaction to buy the shares of Sea-Ray described in the LOI,” and that the Asset Purchase Agreement sent on 25 March described a “completely different transaction.” She highlighted that the proposed deal involved an asset rather than a share purchase, with a lower purchase price and other very different terms and conditions. Jobini indicated that, after some initial willingness to consider this new proposal with substantial changes, it had ultimately decided it could not proceed because the revised transaction did not make sense for it.
Ares’s president, Christos Christopoulos, testified that he was surprised by the May 13 email, as Ares believed the parties were still on track to finalize the sale. A meeting on 27 May 2024 was, in Ares’s view, intended to complete the transaction. Ares’s consultant, Mr. Youssef, who had been involved throughout the negotiations, said that only two minor points remained to be settled to close the deal.

The contractual clause and its interpretation

The litigation turned on the expense reimbursement clause in the LOI. That clause obliged the seller to reimburse the buyer’s actual fees and expenses if the parties failed to reach a binding agreement by the Ultimate Date “due to Sellers electing to back out of the deal.” Otherwise, if no binding agreement was reached and no extension was agreed, the LOI would simply expire without additional obligations, aside from confidentiality.
Ares claimed that Jobini withdrew from the transaction, thereby triggering the reimbursement obligation. Ares said it incurred $51,700 in costs related to the proposed acquisition but reduced its claim to $15,000 before the Small Claims Division. It argued that its post-LOI efforts, negotiations and due diligence occurred in reliance on the contemplated share purchase and that Jobini’s May 13 email amounted to the seller backing out. Accordingly, Ares sought repayment of part of its expenses under the LOI clause.
Jobini countered that it had not “backed out” within the meaning of the LOI. In its view, the original share purchase transaction described in the LOI was never finalized within the agreed timeframe, and instead Ares presented an asset purchase offer on different terms, including a lower price and different tax consequences. Jobini argued that the change in transaction structure and terms meant there was no longer agreement on fundamental aspects of the deal. From this perspective, the LOI expired in accordance with its own terms and the reimbursement clause never became operative.

Key evidentiary disputes and commercial context

The parties disagreed sharply about how close they were to a final deal and about the significance of the unresolved points. Ares maintained, through Mr. Youssef, that only two “minor” elements remained to be agreed when Jobini sent the May 13 withdrawal email and later refused to proceed.
The court rejected this characterization. It found that the sticking points related to the exclusion from the sale of inventory valued at about $1,805,000 and accounts receivable of approximately $800,000. The judge held that these were major elements in the sale of a company, not minor details. Disagreement over whether the inventory and receivables were included or excluded went to the heart of the business and its value.
Ares also argued that inventory and accounts receivable were not specified in the LOI and therefore should be treated as excluded. The court did not accept this. Applying principles of contractual interpretation to an incomplete contract, the judge emphasized the need to consider the parties’ true intention and the general rules governing the sale of a business. On that basis, the court concluded that Jobini’s position—that these items formed part of the business being sold unless otherwise agreed—was better supported.
Taken together, the evidence showed that there was no meeting of the minds on major financial components of the deal. The court found that the parties’ positions on inventory and receivables were irreconcilable, which meant the sale could not be concluded on mutually acceptable terms. In this context, the court determined that the specific condition in the LOI’s reimbursement clause—failure to reach a deal “due to Sellers electing to back out”—was not met. The breakdown resulted from a fundamental divergence over core deal terms rather than a unilateral withdrawal by the seller from an agreed-upon share transaction.

Outcome and implications

The Court of Québec, Small Claims Division, ultimately held that the defence was well-founded and that Ares’s claim must fail. Because the parties never achieved agreement on essential elements such as inventory and accounts receivable, and because Ares had shifted from the original share purchase structure to a different asset transaction, the LOI’s expense reimbursement clause did not apply. The court concluded that Jobini’s refusal to proceed with the new asset deal was not the type of “backing out” contemplated by the LOI.
Accordingly, the court dismissed Ares’s $15,000 claim in its entirety. Each party was ordered to bear its own legal costs. The successful party in the litigation was Investissements Jobini inc., and no monetary award, damages, or costs were granted in its favour—the total amount ordered in favour of the successful party was therefore $0.