Anonymised, illustrative composite. The purchase agreement made each of four sibling sellers liable only for their own proportionate share of any indemnity claim. When the largest shareholder turned out to have nothing left, the buyer's fully valid claim became a partial recovery.
At a glance
Four siblings sold their family logistics company for $7,600,000, holding unequal shares reflecting decades of gradual buy-ins by the younger three: 38%, 24%, 22% and 16%. The purchase agreement's indemnity article stated plainly that “the liability of each Seller under this Article shall be several and not joint and several, in the proportion set out in Schedule A opposite that Seller's name” — a standard structure for a multi-seller deal where each seller wants exposure capped at their own share of the business, not the group's.
Eighteen months after closing, an environmental assessment triggered by a customer's own audit turned up soil contamination at one yard, tied to a fuel-handling practice the sellers had not disclosed. The buyer established a $760,000 remediation claim, and it was not seriously disputed on the merits. Applying the several-liability schedule, each seller's share was: 38% seller — $288,800; 24% seller — $182,400; 22% seller — $167,200; 16% seller — $121,600.
The 38% seller, the eldest and the one who had negotiated the sale, had used the bulk of his after-tax proceeds to buy a retirement property outright shortly after closing and held no other assets of consequence in Canada. He was, in practical terms, judgment-proof for the purposes of this claim.
The buyer collected the other three sellers' combined shares in full: $182,400 + $167,200 + $121,600 = $471,200, or 62% of the $760,000 claim. The remaining $288,800 — the largest single share, because it belonged to the largest shareholder — went uncollected.
No statute overrides an express contractual allocation of several liability among co-sellers. The purchase agreement did not leave the question open for a default rule to fill; it affirmatively chose several liability, in stated proportions, and that choice is enforced as written regardless of how any one seller's solvency turns out after the fact.
The one Ontario statute that touches joint obligations at all, the Mercantile Law Amendment Act, does not reach this situation. Its s.4 provides that where “one or more joint contractors, obligors or partners die, the person interested in the contract, obligation or promise entered into by such joint contractors, obligors or partners may proceed by action against the representatives of the deceased contractor, obligor or partner in the same manner as if the contract, obligation or promise had been joint and several”. Two things keep it out of this file: it converts a joint obligation into one enforceable as if joint and several, not a several one that was already drafted that way; and it operates only where a co-obligor has died, not where one is merely insolvent or has spent the proceeds. None of the four sellers here had died — the eldest was alive and simply had nothing left to collect against.
The other candidate worth checking on these facts is Ontario's Fraudulent Conveyances Act, which does exist and is real, but is weak here for a reason that is itself the lesson. Section 2 voids “every conveyance of real property or personal property…made with intent to defeat, hinder, delay or defraud creditors”. The eldest seller's retirement-property purchase happened with his own, then-unencumbered proceeds, well before the environmental claim existed or was foreseeable — there was no creditor in view yet for any transfer to have been intended to defeat. An after-the-fact spending decision, made before a claim arises, is not what s.2 reaches; it targets transfers timed to outrun an existing or anticipated claim, not ordinary spending that merely happens to leave a later claimant unpaid.
The buyer pursued and recovered from the three solvent sellers in full, then wrote off the $288,800 balance rather than pursue a judgment against the fourth that had no realistic prospect of collection. There was no legal argument available to shift that seller's share onto the other three; several liability, by design, does not let one seller's shortfall become another seller's problem.
Had the purchase agreement instead made the sellers jointly and severally liable, the buyer could have pursued any one of the three remaining sellers for the full $760,000, leaving them to sort out contribution among themselves and against their brother afterward — a materially better position for the buyer and a materially worse one for whichever solvent seller ended up fronting the largest share. That allocation of risk is exactly what the several-liability clause was negotiated to avoid, and from the sellers' side it worked as intended; it simply left the buyer holding the shortfall instead.
The tell was in the shareholding schedule itself, not in anything that happened after closing: several liability sized to an uneven ownership split means the buyer's single largest point of exposure is whichever seller holds the largest share, and a $250,000 escrow split evenly across four sellers protects against an even loss, not a concentrated one. A buyer facing an uneven seller group should size any holdback or escrow to the largest individual share, not to an average across the group.
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