Can I get out of a deal if the seller hid that a key customer was leaving?

The answer starts with how far the deal has gone. Before a binding agreement, a buyer has the most freedom. After one, the contract and the law decide what happens next. Because the facts matter, treat this page as a map of where to look, not a verdict on any deal.

Where you are in the deal

BDC says a letter of intent is not intended to be fully binding unless otherwise expressly stipulated, so read which clauses, such as confidentiality or exclusivity, do bind you. A signed purchase agreement is a different matter. If you have not signed one, you may be able to renegotiate or step back. If you have, the options turn on its terms.

What the agreement says

BDC describes the representations and warranties section as where the vendor formally describes the condition of the business and makes disclosures about issues it knows of. It adds that the indemnities section sets the compensation the vendor must pay if disclosures prove inaccurate. Check for a representation about customers, a condition that must be met before closing, and any right to terminate.

What the seller was asked

BDC’s due diligence guidance tells buyers to ask what the vendor has said about a customer’s past and expected future purchases, and says that where customer concentration is high, it is helpful to meet those key clients. Keep your questions, the seller’s answers and any documents. They show what was said and when. BDC also notes that a seller is not liable for misrepresentations forever, so the timing of any claim matters.

Options short of walking away

• Ask for a price adjustment, holdback or funds held in trust, which BDC lists among the ways parties address newly found risks.
• Ask for an indemnity or a longer transition period.
• Seek legal advice about whether the facts support a claim.

To see how concealment is spotted earlier, read how to know if a seller is hiding something.