How to Make an Indemnity Claim Against a Seller in Ontario

You've confirmed there's a real, covered loss, checked the survival period, and are ready to actually pursue the seller. What comes next often surprises buyers: the mechanics of making a claim are usually well documented in the purchase agreement, but actually collecting — especially from a seller who's slow to respond, spread across multiple individuals, or simply gone quiet — is a different, more practical problem.

This article focuses on that practical side: who you're actually pursuing, how to escalate sensibly, and what to do when the seller doesn't cooperate.

Before Anything Else: Confirm Who You're Actually Pursuing

"The seller" isn't always one clearly identifiable party. Check your purchase agreement for:

• Whether there's one seller or several — a business sold by multiple shareholders may have each of them as a party to the agreement, individually or jointly.
• Whether individuals personally guaranteed the representations, particularly on a share sale, or whether only a holding company signed.
• Whether the selling entity still exists — a corporation can be wound up or dissolved after closing, which changes who you'd actually need to pursue.

Getting this wrong at the outset — sending notice to the wrong party, or missing a party who's actually liable — can cost you time you don't have if your survival period is running. If you're not sure who the correct indemnifying party is, contact us before sending anything formal.

The Escalation Ladder: From a Conversation to a Dispute Mechanism

Most claims don't need to start — or end — with a lawsuit. A sensible order looks like this:

1. An informal conversation or email, flagging the issue and giving the seller a chance to engage cooperatively, where the relationship and the size of the claim make that practical.
2. Formal written notice, in the form and within the timeframe your purchase agreement requires — this step is not optional no matter how the informal conversation went, since it's what actually preserves your contractual right.
3. A draw against any holdback or escrow, if one exists, following whatever procedure the agreement or escrow agreement sets out.
4. The agreement's dispute-resolution mechanism, if the seller disputes the claim — commonly referral to an independent accountant for financial disagreements, or arbitration or litigation for other disputes, depending on what your agreement specifies.

Skipping straight to step 4 is sometimes necessary, but it's rarely the cheapest or fastest path if the earlier steps are genuinely available.

When the Seller Goes Quiet or Refuses to Engage

A seller who doesn't respond to a properly delivered notice doesn't automatically defeat your claim, but it does change your options:

• Check whether your agreement treats a lack of response within a set period as acceptance, or as a dispute requiring the formal resolution mechanism — agreements handle this differently.
• If there's a holdback or escrow, a non-responsive seller makes that fund even more valuable, since it may be your most direct route to recovery without needing the seller's active cooperation.
• Where there's no holdback and the seller is unresponsive, pursuing payment directly generally means moving toward the agreement's dispute mechanism sooner rather than continuing to wait.

Multiple Sellers, One Claim: How Liability Gets Divided

Where a business was sold by more than one person, how liability is shared among them is a drafting question, not a default rule — check whether your agreement makes the sellers jointly and severally liable (meaning you can pursue any one of them for the full amount) or liable only in proportion to their individual ownership share. Don't assume either structure applies without reading your specific agreement; this single distinction can significantly affect who you need to pursue, and how much you can realistically recover from any one of them.

A Practical Checklist Before You Send Anything in Writing

• [ ] Confirmed exactly who the indemnifying party (or parties) are under the agreement.
• [ ] Confirmed you're within the applicable survival period.
• [ ] Calculated the loss with supporting documentation, even if only a good-faith estimate at this stage.
• [ ] Checked whether the claim clears the basket threshold and fits within the applicable cap.
• [ ] Identified the exact notice method and address the agreement requires.
• [ ] Spoken with a lawyer before sending formal notice, particularly if more than one seller or an unresponsive party is involved.

Frequently asked questions