Not automatically — but an Ontario court has already held a complete letter of intent to a full deal, on wording no different from the templates most buyers and sellers sign.
Short answer
Not automatically. Most Canadian letters of intent are drafted so that price, structure and the other commercial terms stay “subject to” due diligence, financing and a full agreement, and in that form they do not bind you on those terms. But a court will hold you to a letter of intent that reads as complete and unconditional in its own wording, once the parties have started acting as if the deal were done — whatever the document is titled.
Ontario courts look at what a document actually says and how the parties behaved afterward, not what it is called. In Wallace v. Allen, 2009 ONCA 36, the Court of Appeal for Ontario applied “one who executes a commercial document intends to be bound thereby” to a signed letter of intent whose price and other commercial terms were complete and were never expressed to be “subject to” a further agreement.
Two clauses in that letter said the deal “must be reduced into a binding agreement” within 40 days. The Court read that as a promise about paperwork, not a condition on the deal itself — the parties still had to sign a longer document, but the terms they had already agreed to were not up for renegotiation.
The default runs the other way for most LOIs. Treadstone Law — which clauses in an Ontario LOI are actually binding sets out the usual pattern in an Ontario business sale: confidentiality and exclusivity clauses typically bind immediately, while price and structure are typically left “subject to” due diligence, financing and a definitive agreement. What flips a letter from that default into a binding deal is commercial terms stated as complete rather than conditional, any “further agreement” language read as being about wording rather than substance, and conduct after signing that is consistent with the deal already being final.
This is not a hypothetical risk. In the Case Files library, a letter of intent the seller thought was just a roadmap shows a seller who believed his signed LOI was “just a roadmap” being held to it in full once a better offer arrived — because the letter he had signed did not read that way.
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