Generally, the parties will enter into a letter of intent that sets out the principal terms of the proposed transaction and contains provisions dealing with confidentiality, an exclusivity period, expense allocations (and reimbursement if the transaction does not close) and a due date for entering into a definitive transaction agreement. Usually, such letters are not binding (and should be stated as such, if applicable) although provisions relating to, for example, confidentiality, reimbursement of expenses and exclusivity are typically binding. The parties should ensure that the letter clearly discloses the relevant provisions that are or are not binding.

• Exclusivity: There is no consistent market practice. Exclusivity provisions can be found in the term sheet or letter of intent. In some instances, they are included as a standalone exclusivity agreement or as part of a nondisclosure agreement.
• Break fee: Not common in private company transactions.
• Confidentiality: Typically included in the term sheet or letter of intent if not included in a standalone non-disclosure agreement.

It is common to negotiate confidentiality and exclusivity agreements, and sometimes they are combined.

Apart from in the Province of Quebec, there is no general duty to act in good faith when negotiating. However, the Supreme Court of Canada has recognized that parties have a duty of honesty and good faith in contractual performance. The parties must not lie or knowingly mislead each other about matters linked to the performance of a contract. There is also caselaw that suggests that there is a duty to negotiate in good faith if there is a special relationship between the parties that leads to a meaningful power imbalance or vulnerability of a party.