The Buyer Missed Closing and Then Demanded the Deposit Back

The situation

Three days before closing, Bogdan received a message from the buyer's lawyer: their client would not be completing the purchase on the scheduled date, and they intended to seek return of the deposit already paid. It was the first sign of trouble in a sale that, until that point, had looked entirely on track.

Bogdan had built his surveying practice in Etobicoke over more than two decades. A health diagnosis earlier that year had made the decision to sell straightforward in one sense and painful in another. He needed the sale to close on a firm timeline, both to fund his own care and because he had already begun stepping back from client files in anticipation of the handover. He found a buyer, Josee, another surveyor looking to expand into a second location, who made an offer of just under $1 million, reflecting the practice's client base, equipment and ongoing contracts.

The purchase agreement, as is standard, required a deposit on signing, held in trust, to be applied to the purchase price at closing or forfeited if the buyer failed to close without a valid excuse under the agreement. Josee paid the deposit on time. Financing for the balance was arranged through Genevieve, a business partner with considerably more capital behind her than Josee had on her own, who had agreed to fund the larger share of the purchase price in exchange for a stake in the combined practice going forward.

When Genevieve's own financing fell through days before closing, for reasons Bogdan was never given in detail, Josee and Genevieve did not simply forfeit the deposit and walk away. Instead, their lawyer argued the deposit should be returned, pointing to language elsewhere in the agreement about financing conditions that Bogdan's side read very differently. With considerably more resources than Bogdan had to fight a drawn-out dispute, Genevieve made clear early on that she was prepared to make the process long and expensive if it came to that. Bogdan's own lawyer, who had handled the file to that point, suggested a partial compromise to avoid conflict. Bogdan, weighing his health, his savings, and a principle he did not want to abandon simply because the other side had more money behind them, wanted a second opinion before agreeing to give anything back.

What the documents showed

The dispute turned entirely on how the deposit and financing clauses in the purchase agreement interacted, which meant the outcome depended less on argument and more on what the documents actually said. Deposits in a business purchase agreement typically serve two functions: they show the buyer is serious, and they compensate the seller if the buyer backs out. Whether a deposit is refundable in a given situation depends on whether the buyer's failure to close falls inside or outside any conditions the agreement allows for, such as financing not being secured by a specified date.

Genevieve's lawyer argued that the purchase agreement's financing condition had not been satisfied through no fault of the buyer, and that under general contract principles a deposit should not be forfeited where a party could not perform for reasons beyond its control. It was a plausible-sounding argument on its own, and exactly the kind of argument that succeeds when the underlying documents are ambiguous.

These documents were not ambiguous. When we pulled the full signed agreement, the financing condition had an explicit deadline, well before the closing date, by which Josee was required to confirm financing was in place or terminate the agreement and recover the deposit. That deadline had passed weeks earlier without any notice from Josee's side. Under the agreement's own terms, once that date passed without a termination notice, the financing condition was deemed satisfied and the deposit became non-refundable on a failure to close for any other reason, including a financing arrangement that later fell apart.

In other words, the buyers had the contractual right to walk away cleanly and recover their deposit, up until a specific date, but did not exercise it. By the time Genevieve's financing collapsed, that door had closed under the agreement both sides had signed. The email correspondence around the original negotiation of that clause, which we located in Bogdan's files, also showed the deadline had been proposed by the buyer's own lawyer at the time, undercutting any later suggestion that the term was unfair or one-sided.

There was a second detail in the documents worth noting. The purchase agreement described the deposit specifically as liquidated damages, a pre-agreed estimate of the seller's loss if the buyer failed to close, rather than simply a payment on account of the price. That distinction mattered because it meant Bogdan did not need to separately prove his actual financial loss from the failed sale to keep the deposit. The amount had already been fixed months earlier, before either side had reason to expect a dispute.

What we did

1. Reviewed the full signed purchase agreement against the buyer's lawyer's letter, mapping every deposit and financing clause to determine exactly what the contract required and by when, since the dispute would ultimately be decided on the wording rather than on either side's account of what was fair, and flagging every date that could matter before the other side had a chance to argue the calendar differently.
2. Located the original negotiation correspondence in Bogdan's records showing which side had proposed the financing deadline, which strengthened the position that the term reflected a deliberate, mutually negotiated allocation of risk rather than fine print buried by one side, and gave Bogdan's response to the return demand a factual foundation beyond simply pointing to the contract's wording, since a deadline the other side had proposed itself is much harder to dismiss later as unfair boilerplate.
3. Confirmed the deposit's characterization as liquidated damages within the agreement itself, which removed any need to independently prove Bogdan's actual financial loss and meant the fixed amount already agreed by both parties would govern the outcome regardless of what either side's real costs turned out to be, a distinction that mattered once the other side began asking what Bogdan had actually lost.
4. Responded formally to the buyer's lawyer setting out the deadline that had passed, the absence of any termination notice, and the resulting effect under the agreement, giving the other side a clear written basis to reassess their position before costs escalated for either party, and putting the relevant clauses and dates on the record early rather than waiting for a formal claim.
5. Advised Bogdan on the realistic strength of his position given the deeper resources on the other side, so he understood the deposit dispute was not primarily a financial risk to him but a question of whether the other side would pursue a weak claim anyway to pressure a settlement he did not need to accept, and that his health situation did not change what the contract said.
6. Prepared the file for a formal claim to recover the deposit from the trust account holding it, in case the other side did not back down, so Bogdan was not left waiting on an informal resolution that never materialized while his health situation made delay costly, and so the next step was ready the moment it was needed, without losing weeks assembling material that should already have been organized.
7. Kept Bogdan informed at each stage with realistic timelines, since a drawn-out dispute over months, even one likely to succeed, was a real burden given his health, and he needed to know honestly how long a formal claim might take if the other side did not back down on their own, rather than being reassured with vague promises about how quickly things would resolve.
8. Held firm through two rounds of escalating correspondence from Genevieve's lawyer, declining to negotiate a partial split of the deposit despite pressure to settle quickly, because the contract terms did not support a compromise and conceding one would have rewarded a claim without merit, regardless of how much longer the other side threatened to draw the dispute out, since capitulating even partially would have signalled that pressure alone could move a position the contract did not support.
9. Confirmed release of the deposit once the other side withdrew the claim, coordinating with the trust holder to release the funds to Bogdan promptly rather than leaving them tied up any longer than necessary given how much he needed the certainty, and confirming in writing that no further claim would follow, closing the file so Bogdan could turn his full attention to relisting the practice without a loose thread still hanging over the transaction.
10. Advised Bogdan on relisting the practice once the deposit was resolved, pointing him toward a business broker experienced with professional service firms so the next sale process moved faster than the first one had, given the months already lost to the failed transaction and the timeline pressure his health situation still placed on finding a buyer, and making sure the lessons from the first deal's financing clause carried into how the next agreement was drafted.

The outcome

Faced with a written deadline they had missed and their own lawyer's earlier correspondence proposing that same deadline, Genevieve and Josee withdrew the demand for the deposit's return roughly six weeks after first raising it. The deposit, held the entire time in the lawyer's trust account handling the transaction, was released to Bogdan in full.

The underlying sale itself did not proceed, since Josee and Genevieve no longer had financing to complete the purchase. Bogdan kept the deposit as the agreement intended, compensation for a buyer who did not close, but he still had to find a new buyer for the practice, which added several months to a timeline he had hoped to have finished by then. He relisted the practice with the help of a business broker roughly two months after the original sale fell through, working from the same valuation that had supported the first deal.

What made this a clean result rather than a costly one was that it never required a trial. The strength of the position came from documents that already existed, the negotiated deadline and the correspondence around it, rather than from a drawn-out fight. Genevieve's greater resources gave her the ability to make the dispute expensive if she chose to, but they did not change what the contract said, and once that was made plain in writing, continuing to press the claim had little upside left for her side.

For Bogdan, the deposit itself was never the largest part of what was at stake. It was confirmation that a signed agreement, properly drafted, still meant something when the other side's circumstances changed and they wished it did not. Given his health and the time already lost to the failed closing, having that question resolved firmly, without a drawn-out court process, let him move on to relisting the practice with far less uncertainty hanging over him.

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