What remedies do I have if the seller backs out of the business sale?

Walking away from a signed purchase agreement, without a right under it to do so, is a breach of contract, and the remedies come from the agreement itself and from the courts. Nothing on this page says which remedy fits your deal. Start by reading the agreement: it may say what counts as a seller default, how written notice must be given, and where a dispute is heard. A lawyer can then tell you what is realistic for your facts.

Court orders and damages

In Ontario, the Courts of Justice Act says a court that can order specific performance may award damages in addition to, or in substitution for, specific performance (s. 99). Specific performance is an order that the seller carry out the contract. The Act also provides that, unless otherwise provided, only the Court of Appeal and the Superior Court of Justice, not the Small Claims Court, may grant equitable relief (s. 96(3)). If part of your deal is a contract to deliver specific or ascertained goods, Ontario’s Sale of Goods Act (s. 50) says that, in an action for breach of such a contract, the court may, if it thinks fit, direct that the contract be performed specifically.

Quebec works differently

Quebec’s Civil Code sets out the creditor’s options where the debtor fails to perform without justification and is in default: force specific performance of the obligation; in the case of a contractual obligation, obtain the resolution or resiliation of the contract or the reduction of the creditor’s own correlative obligation; or take any other measure provided by law to enforce the right to performance. It also says that, notwithstanding any stipulation to the contrary, a creditor is not entitled to resolution or resiliation of the contract where the default is of minor importance, unless, in the case of an obligation of successive performance, the default occurs repeatedly. Other provinces have their own rules, so confirm which law governs your agreement.

Watch the time limit

Ontario’s Limitations Act, 2002 says that, unless the Act provides otherwise, no proceeding may be commenced after the second anniversary of the day the claim was discovered (s. 4). For business agreements, meaning agreements where no party is a consumer, a limitation period under the Act other than the ultimate period in s. 15 may be varied or excluded by an agreement made on or after October 19, 2006, and the s. 15 period may be varied subject to s. 22(4) (s. 22(5)). Check whether your agreement does that, and ask about the rules in the province that governs it.

Steps to take now

• Keep every notice, email and message about the closing date and the seller’s refusal.
• Check the agreement for a notice-of-default clause and follow it exactly.
• Ask a lawyer whether the agreement caps damages or sends disputes to arbitration.
• Ask what happens to your deposit and any costs you have already paid.

Related reading on the deposit and on how the agreement is built is linked below, including the purchase agreement, clause by clause.