What if equipment is broken or missing after I take over a business?

Equipment that is missing or does not work on day one is a contract problem first. The questions are what the agreement said you were buying, what the seller promised about it, and what remedies you kept. This page uses Ontario’s Sale of Goods Act as its example. Other provinces legislate separately, and whether the Act applies to your particular sale is a legal question. For machines that run but are near the end of their life, see what if the equipment is worn out.

Start with the schedule

Compare what you received with the equipment schedule and any closing walk-through notes. An item on the schedule that is not there is the clearest case. Ontario’s Act implies a condition that goods sold by description will correspond with the description, and a condition that the seller has a right to sell them. A missing item may also be leased or owned by someone else, which is covered in what if the equipment turns out to be leased.

Broken equipment

The Act says there is no implied warranty or condition about quality or fitness for a particular purpose, except in the cases it lists. One is merchantable quality, where goods are bought by description from a seller who deals in goods of that description, and, if the buyer has examined the goods, not for defects that the examination ought to have revealed. Another is fitness, where the buyer made the particular purpose known so as to show reliance on the seller’s skill or judgment and the goods are of a description that it is in the course of the seller’s business to supply.

The remedies

For breach of warranty, the Act lets the buyer set the breach up against the price, or sue for damages, or both if further loss follows. Damages are measured as the estimated loss directly and naturally resulting, in the ordinary course of events, from the breach. Where the contract is not severable and the buyer has accepted the goods or part of them, or the contract was for specific goods whose property has passed, a breach of condition can only be treated as a breach of warranty, not as a ground for rejecting the goods, unless a term of the contract, express or implied, says otherwise.

Why the contract decides

The Act allows an implied right, duty or liability to be negatived or varied by express agreement, by the course of dealing between the parties, or by a usage that binds both. An “as is” term can therefore narrow what the Act gave you. Check for one, and for any seller warranties, indemnity or holdback in your agreement, and talk to your lawyer promptly.