Why Valuation Mistakes Usually Do Not Negate A Business Sale

Québec contract law is based on the principle that for a contract to be validly formed, the parties must consent freely and knowingly. An error can sometimes vitiate that consent and justify intervention by the courts. However, not all errors have this effect. Generally, a party cannot annul a contract simply because it realizes it made a poor deal or overestimated the economic benefits of a transaction with the other party.

This distinction is particularly important in business sales and acquisitions, where decisions often ride on projections, assumptions and expectations. Québec courts have long recognized that commercial activity inevitably comes with risk and uncertainty. This is where the concept of “economic error” comes into play.