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.

Economic error: A risk contracting parties are expected to bear

Articles 1399 and 1400 of the Civil Code of Québec state that an error may vitiate consent if it relates to an essential element which determined that consent. An error about the nature of the contract, the object of the prestation, or an essential quality can, in some cases, justify annulling an agreement.

With that said, the courts draw a line between an error relating to a fundamental element of the contract and one that only concerns its economic value or profitability. Economic error usually applies when a party understands the facts but misjudges what they mean financially. The information itself is correct—it is the resulting analysis or forecasts that are wrong.

These types of errors may involve the anticipated return on an investment, a business’s future revenue, the value of an asset, or the financial effects of a contract clause. Under Québec law, they are generally treated as a business risk, not a real defect of consent. Allowing a party to walk away every time a deal turned out to be less advantageous than expected would undermine the stability of contractual relationships.

Courts regularly point out that business decisions necessarily rest on assumptions and forecasts that may prove inaccurate over time. Parties typically have to live with the consequences of their own economic decisions.

The parties’ level of sophistication as an evaluation criterion

Rémillard c. Coopérative fédérée de Québec is a good example to illustrate this principle.¹ In that case, a shareholder agreement provided for a mandatory share buyback mechanism. The Coopérative argued that the formula produced a price well above what it had anticipated during negotiations and tried to avoid applying the formula.

The court rejected this argument. The fact that a clause produces an unfavourable economic outcome later does not render it invalid. When a contractual provision is clear and freely accepted, the courts will generally apply it as negotiated.

The court also noted that the Coopérative had substantial resources and experienced advisors on hand. It had the means to work out the consequences of the mechanism before signing the contract.

This same reasoning appears in Lafond c. Pétroles Crevier inc.² The investors argued that the financial projections behind their decision to invest turned out to be far too optimistic. The court disagreed, finding this was simply an economic error. The forecasts had been built on the information available at the time of the deal and could not have predicted how the market would later move.

Absent fraud, concealment, or false and determinative representations, the investors had to bear the risks that came with their own business decision.

Under what circumstances can a valuation error vitiate consent?

Economic error is generally excluded, but an error in a transaction’s value can still lead the courts to intervene.

They recognize an important exception when the error is not just about a party’s economic expectations but relates instead to a fundamental characteristic of the deal or something essential to the parties’ consent.³

At that point, the question is not whether the party made a poor deal—it is whether they contracted on a mistaken essential element.

Poirier c. Poirier (Succession de) is an example of this.⁴ In this case, the parties had used a valuation method that left out the fair market value of some significant assets. The court concluded that the error directly affected the price-determination mechanism, which was a central part of the deal. The sale was annulled as a result.

Likewise, in L’Espérance c. Poirier, the error was that part of the properties sold sat within a protected riparian buffer.⁵ Although this had a real financial fallout, what it mainly affected was an essential characteristic of the property itself. So, the court granted relief by reducing the sale price, rather than annulling the deal outright.

Together, these cases show that courts are more willing to step in when an error relates to something essential to the transaction, not just its bottom line.

The error must also be excusable

Even a determinative error must clear one more bar: it has to be excusable.

Québec law will not allow a party to invoke its own negligence or failure to verify something as a way out of its obligations. Courts look closely at the circumstances around the deal—what information was available, what verification took place, and how experienced the parties were.

In Bernferst Holdings inc. c. Jil-Steve Holdings Ltd., the parties had set the purchase price based on the business’s net book value.⁶ After the sale closed, an existing accounting error came to light showing the business had been significantly overvalued.

The court found this was not about the investment’s future profitability—it was an objective figure used directly to set the price. Because the error struck at the very basis of the parties’ consent, the contract was annulled despite release clauses and surviving representations and warranties.

By contrast, in Béliveau c. 9370-4328 Québec inc., the seller asked to revise the sale price after discovering an omission in its own financial calculations.⁷ The court turned down the request. The error came down to an internal omission the buyers had no reasonable way of knowing about. The buyers had relied on information the seller provided, and its own professionals had validated. Given that, the court found the error inexcusable, and the seller had to live with the consequences.

Bottom line

Québec case law draws a clear line between genuine defects of consent and mere economic errors. As a rule, an error about a transaction’s profitability, value, or economic benefits counts as an economic error—part of the normal risk of doing business. A party generally cannot challenge a business sale just because, in hindsight, they think they got a bad deal.

Courts will step in, though, when the error relates to something essential to the deal, involves objectively inaccurate data that had a determinative effect on consent, and is excusable. That is how Québec law balances protecting the integrity of consent against keeping commercial relationships stable and predictable. It fixes fundamental errors but does not shield parties from the ordinary risks that come with business decisions.

Footnotes

1. Rémillard c. Coopérative fédérée de Québec, 2007 QCCS 4122.

2. Lafond c. Pétroles Crevier inc., 2004 CanLII 47086 QCCS.

3. Légaré c. Morin-Légaré, 2002 QCCA 41210.

4. Poirier c. Poirier (Succession de), 2008 QCCS 1908.

5. L’Espérance c. Poirier, 2012 QCCS 5414.

6. Bernferst Holdings inc. c. Jil‑Steve Holdings Ltd., 2009 QCCS 2976./p>

7. Beliveau c. 9370-4328 Québec inc., 2025 QCCS 3547.

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