LOIs in Ontario after Project Freeway decision by ONCA

* This is for general informational purposes only and does not constitute legal advice. You should not act or refrain from acting on the basis of any information herein without seeking the advice of a qualified lawyer licensed in your jurisdiction.* I recently reviewed LOIs by Searchers still using old boilerplate, but the legal landscape for LOIs in Ontario has changed since 08 December 2025. Before Project Freeway decision by the Ontario Court of Appeal (ONCA), the legal consensus was that a well-drafted Entire Agreement clause in any definitive agreements such as Share Purchase Agreement (SPA) would isolate the Letter of Intent (LOI) entirely — For example, once the SPA was signed, the LOI fell away as a mere negotiating artifact in a M&A transaction. However, ONCA through this decision has endorsed reliance on a LOI as an interpretive aid even though the LOI was non-binding and specifically excluded by the Entire Agreement clause. This marks a notable shift in how non-binding LOIs may be used to interpret and fill gaps of M&A agreements in a post-closing dispute among parties to a definite agreement. Searchers should consider this new interplay between LOI and any subsequent definite agreement (e.g. SPA) in Ontario when drafting negotiation documents like their LOI, MOU or Term Sheet. This decision applies specifically to Ontario but may also be found persuasive in other Canadian jurisdictions. If you are using an older boilerplate for LOI, it would be helpful to explicitly draft clauses that addresses the use of communications such as LOIs, Emails, etc. used during the course of business negotiations. It would be prudent to treat LOIs now more of a legal document rather than just a formal document that is disposable at the end of negotiations to acquire a business. Searchers and acquisition entrepreneurs in Ontario should revisit any boilerplate that they may be using for LOI and also assess post-closing risk posed by their communications and documents during the negotiating process. Project Freeway Inc. v. ABC Technologies Inc., 2025 ONCA 855 and Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53 are helpful decisions to review before starting the negotiation stage of your search. Happy Searching!