The Buyer's Lawyer Tipped Off Our Client's Biggest Customer First

The situation

The email arrived on a Thursday afternoon, forwarded to Carmela with a one-line message from the company's largest customer asking what exactly was happening with the ownership of the business. Carmela, a specialist physician who had co-invested in the logistics company years earlier alongside her business partner Marco, had not authorized anyone to contact that customer about the pending sale. Neither had Marco, who ran the operational side of the company day to day. It turned out the buyer's own lawyer, working for Goran, had reached out directly to the customer during due diligence to ask about the contract's terms, without coordinating first with Carmela and Marco or with us.

The business itself was a Mississauga logistics company Marco had built over more than a decade, with Carmela as an investing partner, generating enough volume that a single customer relationship accounted for a significant share of its revenue. Goran, who owned a separate logistics operation and wanted to acquire the company to expand his own footprint, had agreed to a purchase price in the range of six to seven million dollars, contingent on due diligence confirming the business's contracts and customer relationships were as represented.

That contingency was exactly where the trouble started. Buried in the company's contract with its largest customer was a clause allowing the customer to terminate on short notice if the company's ownership changed, without needing any other reason. Carmela and Marco's original advisor, when the company was formed years earlier, had accepted that clause without much negotiation because at the time a sale of the business was not on anyone's mind. Now it was very much on everyone's mind, and Goran's lawyer had just alerted the customer to the exact change that clause was designed to let them walk away from.

Carmela and Marco called us within the hour, worried that their biggest customer might terminate before the deal even closed, taking a large share of the business's value with it.

Carmela, whose medical practice left her little time to manage the sale day to day, had relied on Marco to handle the operational side of the negotiation and had trusted Goran's team to run due diligence in an orderly, professional way. The unauthorized outreach to their largest customer was the first real sign that Goran's side might not be as careful with the deal as the price they had offered suggested. Marco, who had spent years building the personal relationship with that customer's leadership, was furious that a conversation he would normally have handled himself had instead happened without him, framed in a way neither he nor Carmela could control.

What the law actually said

A change-of-control clause is a contract term that lets one party end or modify an agreement if the other party's ownership shifts in a defined way, typically when a majority of shares or a controlling interest changes hands. These clauses exist because a customer's decision to do business with a company is often based on trust in who is actually running it, and a customer may reasonably want the option to walk away if that changes. They are common in supplier contracts, service agreements, and commercial leases, and they are frequently negotiated loosely at the time a contract is signed, long before anyone is thinking about a future sale.

The clause in the customer's contract with Carmela and Marco's company was broadly worded, giving the customer a right to terminate on notice if control of the company changed, without requiring the customer to show any harm or give a detailed reason. Read narrowly, an asset sale structured so that the operating company itself, rather than its shares, is what the customer contracts with might sidestep some change-of-control language, but this deal was structured as a share sale, meaning Goran would become the new owner of the exact legal entity the customer had contracted with. The clause applied squarely.

What mattered legally was how this particular clause was drafted. Most change-of-control clauses work the way this one did, handing the counterparty an option to walk rather than ending the contract automatically, but that is not universal; some are written so that a change of control is itself a default, or deems the contract assigned and terminated with no election required. On the wording here, the clause gave the customer an option, not an automatic termination. A change of control alone did not end the contract; it gave the customer the right to choose to end it, and that right needed to be exercised according to whatever notice process the contract itself set out. That distinction meant the deal was not automatically at risk the moment the customer learned about the sale. It meant the customer had a decision to make, and that decision could potentially be shaped by how the situation was handled from that point forward, including through direct engagement and a request for a waiver of the termination right before closing.

Goran's lawyer contacting the customer early, before that conversation had been planned or coordinated, had handed the customer both the information and the leverage to make a decision before Carmela and Marco's side had any chance to manage the relationship or negotiate reassurance into the request.

There was also a practical question about timing. The notice period the clause required the customer to give, if it chose to terminate, was measured in weeks rather than days, which meant that even after the premature contact, the company was not at risk of losing the contract overnight. That window mattered enormously, because it gave us time to get ahead of the situation with a coordinated response instead of reacting to an emergency that had already happened. Understanding the actual mechanics of the clause, rather than reacting to the alarm the surprise email had triggered, was what let us treat this as a manageable negotiation rather than a crisis.

What we did

1. Reviewed the full termination clause and its notice requirements immediately after learning about the customer's email, to confirm exactly what rights the customer actually held and how much time the company had to respond before any termination could take effect. This gave us a clear window to work within rather than reacting blind, and it let us tell Carmela and Marco within the same day that the contract was not in immediate jeopardy.
2. Contacted Goran's lawyer directly to establish that any further communication with the customer would go through a single coordinated channel going forward, since the unplanned outreach had already created confusion the deal did not need more of. Goran's side agreed, having recognized their own misstep once it was raised plainly and directly rather than through an accusatory back and forth.
3. Used Goran's premature contact as leverage in the purchase agreement negotiation, pointing out that the risk to the customer relationship was now squarely a risk both parties needed to manage together, not one Carmela and Marco alone should bear if the deal fell through afterward. This shifted several closing conditions in our clients' favour, including who would bear the cost if the waiver process took longer than expected.
4. Prepared a joint approach to the customer with Marco taking the lead, given his long-standing operational relationship with their contact there, while our office prepared the written materials in the background so Marco could speak from a position of confidence rather than reading from a script. We framed the ownership change as a continuation of the same service and team the customer already relied on, rather than a disruption caused by new, unfamiliar management taking over.
5. Requested a written waiver of the termination right from the customer, tied to specific assurances about service continuity, pricing staying unchanged for the remainder of the current term, and the retention of the operational staff the customer already worked with day to day. Giving the customer concrete commitments to evaluate, rather than asking for trust alone in the middle of an ownership change, made the waiver an easier request to say yes to.
6. Negotiated a closing condition into the purchase agreement requiring the signed waiver to be in hand before funds changed hands, with a defined fallback if the customer had not responded by a set date so the whole closing did not hostage itself to one counterparty's timeline. This meant Goran could not close the deal and only afterward discover the contract had been terminated, protecting both sides from an unmanaged surprise once the money had already moved.
7. Coordinated the timing of the waiver request with the broader closing schedule, making sure the customer had enough time to consider the request internally, including running it past their own procurement team, without the process dragging past the agreed closing date. That balance required daily communication with both the customer's counsel and Goran's team in the final two weeks before signing, so that any hesitation on the customer's side surfaced early enough to address rather than on the eve of closing.
8. Documented the entire sequence of events around the premature contact and its resolution in the closing file, including copies of the original email, the correspondence with Goran's lawyer establishing the single coordinated channel, and the signed waiver itself. That record meant if any question ever arose later about whether the customer relationship had been properly disclosed and managed during the sale, there was a clear, chronological account of exactly what happened and when, rather than a reconstruction from memory.

The outcome

The customer signed the waiver twelve days after the original email, agreeing to continue the contract under the new ownership on the same terms, with the added assurance that Marco would remain involved in the business post-closing to manage the relationship personally. The deal closed at the originally agreed price, with no discount and no renegotiation of terms in Goran's favour, despite the early scare over the customer relationship.

What made the difference was not the clause itself, which was straightforwardly enforceable and gave the customer a real option to walk away. It was that Goran's own lawyer's early, uncoordinated contact with the customer meant the risk of losing that customer became a shared problem rather than one Carmela and Marco had to solve alone under pressure from a buyer looking for a price reduction. Once that shared framing was established, Goran's side had every incentive to cooperate on securing the waiver rather than using the risk as a negotiating lever against the sellers.

Carmela and Marco closed the sale with the business's value intact and its largest customer relationship preserved. The episode became, somewhat unexpectedly, the clearest example in the file of how an early misstep by one side of a deal can end up strengthening the other side's position, provided it is identified and used deliberately rather than simply absorbed as bad luck.

Marco's continued involvement after closing, agreed as part of the waiver conversation with the customer, also gave Carmela the clean exit she had originally wanted from day-to-day management of the business, since she could step back from the sale knowing the customer relationship that anchored much of its value was in familiar hands rather than dependent on Goran building trust from scratch. Goran, for his part, ended up with exactly the outcome he had been trying to negotiate toward before his lawyer's early contact complicated things: a business acquired at the agreed price with its most important customer relationship intact and no gap in service through the transition.

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