Anonymised, illustrative composite. A placeholder email filed three days before an eighteen-month survival period expired said a claim might be coming. The clause required reasonable detail of the facts and an estimate of the loss, and the buyer's actual claim was barred before it was ever properly made.
At a glance
A buyer purchased all of the shares of an Ontario promotional products distributor for $3,100,000. The purchase agreement tiered its indemnity survival periods by category, in the pattern that is standard for this kind of deal: fundamental representations survived indefinitely, tax representations tracked the CRA's reassessment period, and general business representations — the catch-all covering day-to-day operational matters — survived for eighteen months from closing. The notice clause attached a condition to any claim under that indemnity: written notice had to specify, in reasonable detail, the facts giving rise to the claim, together with the buyer's good-faith estimate of the resulting loss, given before the relevant survival period expired.
Three days before the eighteen-month general survival period ran out, the buyer's counsel discovered that a significant customer had been under CCAA protection at the time of closing — a fact the seller's accounts receivable representation should have flagged and did not — and that a receivable tied to that customer was effectively worthless. Rather than assembling a proper notice in three days, counsel sent a short email: “We are writing to notify you of a potential indemnification claim relating to the accounts receivable representation. Details to follow.” No facts were set out beyond that one sentence, and no loss estimate was given.
Five weeks later — well after the survival period had expired — the buyer sent a full, twelve-page notice quantifying the claim at $410,000 and setting out the facts in the detail the clause required. The seller's position was immediate: the only notice given inside the survival period did not satisfy the clause's own condition, and a notice that fails the clause's terms does not stop the clock. The buyer argued the placeholder email was enough to put the seller on notice that a claim existed, and that the clause should not be read so strictly as to punish a buyer who flagged the issue on time and filled in the details shortly after.
The claim was for $410,000, against an indemnity cap of $620,000 (20% of the purchase price) and a $31,000 basket. Nothing about the size or merit of the claim was in dispute — the customer really had been insolvent at closing, and the receivable really was uncollectible. The entire $410,000 turned on whether the three-days-early placeholder email, standing alone, preserved the claim.
No statute governs whether a specific notice satisfies a contractual “reasonable detail” requirement — that is ordinary interpretation of the parties' own condition precedent language. Where a purchase agreement says a claim must be notified, within the survival period, with reasonable detail of the facts and an estimate of the loss, that wording is read as a condition precedent to the indemnity, not a courtesy formality: a notice given within the period but missing the required content does not engage the indemnity, in the same way that no notice at all would not engage it.
The reason the parties' own eighteen-month clock — not a longer, statutory one — was ever in play at all is itself a matter of Ontario statute. The Limitations Act, 2002 ordinarily overrides an agreement to vary a limitation period: “A limitation period under this Act applies despite any agreement to vary or exclude it, subject only to the exceptions in subsections (2) to (6).” But one of those exceptions exists specifically for deals like this one. Section 22(5) provides that “the following exceptions apply only in respect of business agreements,” and the first of them is that “a limitation period under this Act, other than one established by section 15, may be varied or excluded by an agreement made on or after October 19, 2006.” The Act defines a “business agreement” as “an agreement made by parties none of whom is a consumer as defined in the Consumer Protection Act, 2002.” A share purchase agreement between two corporations is exactly that kind of agreement — which is why the parties' own eighteen-month survival period, shorter than the Act's basic two-year period, was fully effective on its own terms, and why the placeholder notice's failure to satisfy that period's own condition was fatal rather than merely awkward.
The claim was barred. The buyer's placeholder email, sent within the survival period, did not specify the facts giving rise to the claim in reasonable detail and did not estimate the loss — it said only that a claim might exist and that details would follow. The first notice that actually satisfied the clause arrived five weeks after the survival period had already expired. The seller owed nothing, notwithstanding that the underlying breach was real and the $410,000 figure was never seriously disputed on its merits.
Had the buyer's three-day-early notice actually included the facts already known at the time — the customer's CCAA filing date, the receivable balance, and even a rough estimate of expected recovery — the same claim would very likely have been preserved, and the buyer would have recovered up to the $410,000, net of the $31,000 basket. The gap between a claim that survives and one that is barred outright was not the underlying facts. It was three sentences a lawyer could have added to an email in the same three days.
The tell is in the language of the placeholder notice itself: “details to follow” is hedging, not disclosure. A notice that states a fact and a number, even a rough one, is doing what the clause asks; a notice that promises facts and a number later is asking for an extension the clause never granted.
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