Recently, a transform domain communication system (TDCS) that based on spectrum-dependent complex spreading sequence (SS) has been proposed for low probability of interception (LPI) and cognitive radio applications. This technique requires both sides of a wireless link to estimate current spectrum condition and select unused spectrum holes for generating a multi-carrier based spreading sequence. This paper analyzes the effect of discrete spectrum estimation errors on one or both sides of such a TDCS link. The discrete spectrum estimation is carried out in a per-channel detection manner, i.e., both sides independently determine which subcarriers (channels) within the SS band are available. Our analysis indicates that an irreducible error floor arises due to spectrum estimation errors. The bit error probability performance improves and the error floor is reduced when the probability of single subcarrier detection error p decreases and/or the number of subcarriers increases. We also find that the system performance is more sensitive to the receiver's than to the transmitter's spectrum estimation error.