No statute measures indemnity damages in a Canadian share purchase agreement — the Losses definition decides it, and a standard multiple-of-earnings exclusion can leave a buyer badly under-compensated for a misstated earnings line specifically.
Short answer
Only the dollar-for-dollar loss, in almost every deal, because purchase agreements routinely exclude amounts calculated by reference to a multiple of revenue, earnings or any other financial metric from the Losses a buyer can recover — and no statute overrides that drafting choice, however badly it may undercompensate a buyer whose purchase price was itself built on the misstated number.
No statute measures indemnity damages, or defines “Losses,” in a Canadian share purchase agreement. The measure recoverable for a breach of representation is entirely a creature of how the agreement defines the term. A multiple-of-earnings exclusion is standard boilerplate, and sellers negotiate it for a defensible reason: without it, a modest earnings misstatement is inflated by the deal's own pricing multiple into a disproportionate liability untethered from the actual cash-flow harm.
That logic runs out for exactly one breach type. Most breaches — an unpaid invoice, an unrecorded liability, a misclassified employee — cause a loss genuinely equal to the dollar value of what was misrepresented, and a multiple-based measure would over-compensate for those. A false statement about earnings is different in kind: the buyer did not just receive a company with a hidden cost, it paid a price calculated by multiplying a number that included that error. A dollar-for-dollar measure captures the ongoing cash-flow cost, correctly, but not the separate fact that the purchase price itself was built on the wrong number — and a generic, across-the-board exclusion does not distinguish the two situations.
A carve-out from the multiple-exclusion specifically for the financial-statements or adjusted-EBITDA representation — letting the buyer recover the price impact, not just the cash-flow impact, for that one representation — is the negotiated fix. Absent it, an understated earnings line can be worth several times more to the buyer's actual loss than what the Losses definition lets it collect.
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