Reviewing and Updating Key Customer Contracts After an Ontario Business Acquisition

A business is often worth what it is worth because of its customer relationships — and those relationships are frequently formalized in contracts that were negotiated long before you showed up as the buyer. Confirming those contracts actually still bind, on the same terms, after your acquisition closes is not a formality. It is one of the more consequential pieces of post-closing legal work, and the answer depends heavily on how your deal was structured.

Share Purchase or Asset Purchase Changes the Whole Question

In a share purchase, the corporation that signed the customer contracts does not change — it is the same legal party to the agreement before and after closing. Contracts generally continue automatically, with one important exception: many commercial contracts contain a change-of-control clause that gives the customer a right to consent, renegotiate, or even terminate if ownership of the contracting corporation changes hands. A share sale does not need consents to assign the contract, but it can still trigger a change-of-control right buried in the fine print.

In an asset purchase, the buyer is a new legal party. Existing contracts generally do not transfer automatically — they need to be formally assigned, and most commercial contracts either prohibit assignment without consent or are silent (in which case general contract law principles about assignability apply). Reviewing every material customer contract for an assignment clause is a standard, necessary step, not an optional extra.

Key Clauses to Check in Each Material Customer Contract

• Assignment / anti-assignment clause — does the contract allow assignment freely, require consent, or prohibit it outright?
• Change-of-control clause — does a change in the ownership of the contracting party (relevant mainly in a share sale) trigger a consent right, renegotiation right, or termination right for the customer?
• Term and renewal / evergreen provisions — when does the contract actually expire, and does it auto-renew unless someone acts?
• Exclusivity or most-favoured-customer terms — does the contract commit the business to pricing, volume, or exclusivity terms that constrain how you can run things going forward?
• Termination for convenience — can the customer walk away on notice regardless of anything else in the contract?
• Notice provisions — where does notice need to be sent, and has that address or contact changed since the contract was signed?
• Assumed liabilities interaction — in an asset purchase, confirm whether pre-closing performance issues or disputes under the contract were addressed in the purchase agreement's representations and indemnities.

A Practical Review Process

1. Identify the material contracts. Not every customer needs a full legal review — focus on the contracts that represent meaningful revenue or strategic relationships, as identified during due diligence.
2. Pull the actual signed documents, not just a summary or the customer's name on a list. Amendments and side letters matter as much as the original agreement.
3. Confirm deal structure first, since it changes what you are even looking for (assignment mechanics versus change-of-control triggers).
4. Flag anything requiring consent or notice, and track whether that consent was obtained before or at closing, or still needs to be chased down.
5. Update your own records — contact names, notice addresses, and billing details — so the relationship transitions smoothly on the customer's side too, separate from the legal question of whether the contract still binds.
6. Loop in the customer proactively where appropriate. Sometimes maintaining the relationship matters more than the technical legal position, especially with a long-standing key account.

What to Do If a Contract Requires Consent

If a material customer contract requires consent to assignment (typical in an asset purchase) or gives a termination or renegotiation right on change of control (possible even in a share purchase), do not assume silence means acceptance. Address it directly:

• [ ] Confirm whether consent was obtained before closing as a condition of the deal, or remains outstanding
• [ ] If outstanding, reach out promptly rather than waiting for the customer to notice on their own
• [ ] Document any consent obtained in writing, even if it was originally given informally
• [ ] Consider whether the purchase agreement allocates risk (through a price adjustment, holdback, or indemnity) if a key contract is lost because consent is refused

Frequently asked questions