Sale of maple groves: The importance of clauses describing the goods sold

Commercial transactions involving immovables used to grow maple trees and operate a maple syrup grove are specific. This is the case since the value of the company can be linked to the production capacity of maple syrup as well as to the composition of the equipment needed for it.

However, in the absence of a clause specifying the maple syrup production capacity of a maple grove (number of maple trees, number of taps, quotas, etc.) or an exhaustive list of assets, the buyer runs the risk of appealing to the courts to request a reduction in the sale price if he realizes that the proceeds of the transaction do not meet his expectations. This has been noted in two recent Superior Court decisions, as described below.

Production capacity

In the case 1506-5709 Québec inc. vs. Produits forestiers Sophie et Martin Beauchesne (in French only), the seller had simply mentioned verbally that the maple grove had approximately 13,000 taps before the signing of the promise to purchase.   Neither the documents exchanged between the parties prior to the sale, nor the deed of sale included any reference to the number of taps. The only indication in the promise to purchase was the surface area of approximately 360 acres, which was not included in the notarized deed of sale. This led to the assumption that it was not an essential condition for the completion of the transaction.

The parties had instead focused on the quota, which was priced at $100,000 in the deed of sale. The Quota Certificate given to the buyer indicated 10,500 taps identified by the Fédération des producteurs acéricoles du Québec the previous year and 12,825 taps according to the producer. The property valuation report submitted indicated 12,000 taps. Unlike the distinction made in the Règlement sur le contingentement des producteurs et productrices acéricoles (in French only) (Regulation respecting the quota for maple syrup producers), these documents did not specify whether the taps identified were "potential" or "installed".¹

The Court pointed out that the buyer's president was an experienced maple syrup producer who must have known that the documents issued by the Federation could contain inaccurate information about the number of taps. In fact, the information about the number of taps is based on an inaccurate count estimated from a sample in a limited area, not a complete count of maple trees in the entire field.

Therefore, the buyer should have agreed in writing with the seller to have the guarantee that that there were 13,000 taps installed and to ask for a count before selling or, at the very least, to include a clause to this effect in the promise to purchase and the deed of sale.

Considering that there was no indication of the number of taps in transaction documents, the Court concluded that the number of taps was not an essential condition of the sale. Having failed to show that the maple syrup quota transferred to her was not the one she was expecting, the buyer's recourse to reduce the selling price was therefore dismissed.

The list of company assets

In the case Vallée vs. Produits de l'Érable Savoureux inc. (in French only), the buyer was defending herself against paying the balance of the selling price due for the transfer of the shares of the company operating a maple grove because she was blaming the seller for not delivering all the assets sold in the transaction.

An initial bid was submitted to purchase the maple grove for $1,250,000. However, there was no indication that the offer would be conditional upon obtaining a detailed list of assets. The promise to purchase and the share sale agreement did not provide for such reservations either. On the other hand, the agreement specifically provided that the fixed assets sold consisted of maple syrup production equipment as well as all rolling stock. The parties declared that they knew what equipment was involved and a non-exhaustive list was provided before the signing of the deed of sale. This list, the fixed asset and investment registers and the invoices supporting these registers were all provided to the buyer, who did not express any concerns prior to the signing of the agreement.

Therefore, the Court concluded that obtaining a more detailed list of fixed assets or  representative of the assets sold was not a condition that could abort the sale or lead to a price reduction. The documents signed and approved between the parties did not include such a condition.

Given their experience, the buyers could easily have raised such reservations before closing the transaction rather than waiting until when they want to pay the sale price balance.

For the Court, the old materials and equipment that were not included in the list of fixed assets, valued at approximately $50,000, could not be considered as essential in a transaction totalling $1,250,000. This decision justifies that there is no serious prejudice for the buyer.

Reminder

Whether or not the market value of the enterprise to be sold is composed primarily of the value of the immovables, the licensee must complete the transaction documents by adding clauses relating to the specific terms and conditions of the enterprise, including a summary description of the enterprise and details of the items included in the selling price.