What happens if the buyer walks away before closing?

Buyers do walk away from business deals, and how much it costs them depends heavily on timing. A letter of intent signed in the early stages is a very different document from a definitive purchase agreement signed close to closing, and the two carry different consequences when one side backs out.

Before signing, most terms are still non-binding

A letter of intent is typically structured so that the commercial terms — price, structure, key deal points — are non-binding, meaning either party can walk away from those terms without breaching the agreement. What usually does bind, even in an otherwise non-binding letter of intent, are separate clauses like confidentiality and exclusivity, and those can survive a buyer’s decision to walk.

Once a definitive agreement is signed, the calculus changes

A signed purchase agreement is a binding contract, and a buyer’s ability to walk away without consequence normally depends on whether a closing condition in its favour has genuinely failed — financing falling through, due diligence turning up a real problem, or a condition precedent simply not being met. Walking away because the buyer changed its mind, without a condition to point to, is a different situation and can expose the buyer to a claim for breach.

What a seller can typically do about it

• Point to an escrow or deposit, if the agreement included one, that may be forfeited on a buyer default
• Seek damages for losses caused by the breach, including costs incurred relying on the deal closing
• In some cases pursue specific performance, though courts apply this remedy narrowly
• Resume marketing the business, particularly where an exclusivity period has now expired

Why the conditions precedent are the real battleground

Most disputes over a buyer walking away come down to whether a closing condition was actually unmet, or whether the buyer is using it as cover to exit a deal it no longer wants. Courts generally look closely at whether the party relying on a condition made genuine efforts to satisfy it, since conditions are not meant to function as an unrestricted exit ramp for either side.