Seller Backs Out of a Business Sale in Ontario: What Remedies Does the Buyer Have?

You signed a purchase agreement, lined up financing, maybe even gave notice at your old job — and then the seller stops returning calls, or flatly tells you the deal is off. It happens more often than either side expects, and it can feel like there's nothing you can do about it. There usually is.

A signed business purchase agreement is a binding contract in Ontario, whether it covers shares or assets. When a seller walks away without a legal basis to do so, that's a breach of contract, and Ontario law gives the buyer several possible paths forward. Which one makes sense depends on the deal, the wording of your agreement, and how badly you still want the business.

This article walks through what usually happens first, the main remedies available, and the practical trade-offs between them.

Step One: Check What the Agreement Actually Says

Before assuming a breach, read the purchase agreement itself — closely.

• Were all closing conditions satisfied or waived? A seller who refuses to close while a financing condition, due diligence condition, or landlord consent is still outstanding may not be in breach at all; the deal may simply not have become unconditional yet.
• Is there a "material adverse change" or similar out clause? Some agreements let a seller (or buyer) walk away if the business's condition changes materially between signing and closing.
• What does the agreement say about remedies? Many purchase agreements specifically address what happens if either party refuses to close — including whether specific performance is available, whether a deposit is forfeited or returned, and whether a break fee applies.

If none of those apply and the seller is simply refusing to honour a completed, unconditional agreement, you're likely looking at a straightforward breach.

The Buyer's Main Options

1. Demand performance and set a closing date

Often the first practical step is a formal demand — usually through a lawyer — that the seller close on a specified date, with notice that the buyer will pursue legal remedies if the seller does not. This alone resolves a surprising number of standoffs, especially where the seller's refusal is really cold feet or a misunderstanding rather than a genuine dispute.

2. Sue for damages

The default remedy for breach of contract is monetary damages, intended to put the buyer in the position they would have been in had the deal closed. In a business sale, that can include:

• The difference between the agreed price and what a comparable business would actually cost, if higher.
• Costs already sunk into due diligence and financing tied specifically to this transaction.
• In some cases, lost profits the buyer can prove — though this is harder to establish and courts scrutinize it closely.

Damages claims require the buyer to prove their loss with reasonable certainty, which is one reason many buyers try to negotiate before litigating.

3. Seek specific performance

In limited circumstances, a buyer can ask a court to order the seller to actually complete the sale, rather than just pay damages. This remedy — known as specific performance — is not automatic: courts generally reserve it for situations where the business (or the shares in it) is genuinely unique and money alone wouldn't fairly compensate the buyer for losing it. It's a discretionary remedy, not a guaranteed outcome, and it typically takes longer to resolve than a damages claim.

4. Recover the deposit (and possibly more)

If the buyer paid a deposit on signing, the purchase agreement usually addresses what happens to it if the seller breaches. In many agreements, a seller who breaches must return the deposit and may owe additional damages on top of it. The deposit terms in your specific agreement control this — there's no single default rule that applies to every deal.

Practical Considerations Before You Decide

Most disputes like this settle before trial once both sides understand their exposure. A lawyer's demand letter, backed by a credible willingness to litigate, resolves many of these situations without a courtroom involved.

What You Should Do Right Away

• [ ] Preserve all correspondence, emails, and drafts related to the deal — they'll matter if this becomes a dispute.
• [ ] Confirm in writing (through counsel) that you're ready, willing, and able to close, and ask the seller to do the same.
• [ ] Avoid making public statements or taking actions that could be read as treating the deal as dead if you still want to pursue it.
• [ ] Get advice on limitation periods — Ontario law imposes time limits on bringing a claim, and you don't want to lose your options by waiting too long.
• [ ] Have a lawyer review your specific purchase agreement's remedies, break-fee, and deposit clauses before you decide which path to take.

Frequently asked questions