Can a seller refuse to accept any cap at all on their indemnity exposure?

Yes. Nothing in Ontario law requires an indemnity cap in a business purchase and sale, so a seller is free to refuse one, and some do, particularly where they have strong negotiating leverage or a buyer is especially motivated to close. Whether that position holds usually comes down to bargaining power rather than any legal entitlement either party has to a cap.

In practice, most negotiated deals land on some form of cap because an uncapped indemnity leaves a seller exposed indefinitely for issues that may surface long after they no longer control the business, and buyers understand that an unreasonably harsh position can push a seller to walk away or demand a higher price to compensate for the added risk. A seller resisting any cap should expect the buyer to push back with other asks in exchange, such as a longer survival period, a lower basket threshold, or a larger holdback. There is no default rule filling the gap if the agreement is silent, so whatever the parties actually sign is what governs. A seller weighing this trade-off benefits from discussing the realistic range of outcomes with a Treadstone business lawyer before the term sheet is finalized.