Anonymised, illustrative composite. A retiring owner's business could not simply restart a sale process once the buyer walked days before closing. A real Ontario statute gives a court the power to choose between forcing the deal and awarding damages instead — and it looks to what the parties themselves wrote about remedies.
At a glance
A retiring machine-shop owner signed a definitive asset purchase agreement to sell the business for $2,300,000. Every closing condition was satisfied, including the buyer's financing condition, and a closing date was set. Employees had been told about the sale, key customer contracts had been assigned in anticipation of the transfer, and the landlord had consented to an assignment of the lease.
Four days before closing, the buyer told the seller it would not proceed. There was no financing failure, no material adverse change, and no defined walk-right in the agreement that covered what was happening — the buyer had simply found another opportunity it preferred and decided to abandon this one. The purchase agreement did contain a termination fee provision: a $100,000 reverse break fee, but it was triggered only by a specific, defined set of early-stage walk-rights — a financing-out exercised within a stated window, or a material adverse change — neither of which had occurred here. Nothing in the agreement stated that the termination fee was the seller's sole and exclusive remedy for every kind of buyer default.
The termination fee, had it applied, would have paid the seller $100,000 against a $2,300,000 deal — and against a business that, once a failed sale process became known in a small regional industry, risked losing the staff and customer relationships that made it saleable at all. The seller's counsel estimated that restarting a sale process from scratch, assuming the business survived long enough to attempt one, would cost 12–18 months and a further discount to any new buyer once the failed prior deal became known.
Specific performance for the sale of a business rests on an equitable, common-law test — whether damages would be an adequate substitute, developed for land, where every parcel is treated as legally unique, and extended more cautiously to personal property. But the court's actual power to choose between ordering the deal to close and awarding damages instead is not unwritten: Ontario's Courts of Justice Act gives it a statutory footing. Section 99 provides that “a court that has jurisdiction to grant an injunction or order specific performance may award damages in addition to, or in substitution for, the injunction or specific performance”, and s.96(3) confirms which courts hold that jurisdiction: “Only the Court of Appeal and the Superior Court of Justice, exclusive of the Small Claims Court, may grant equitable relief, unless otherwise provided.” The uniqueness test decides whether the remedy is available at all; s.99 is the statutory source of the court's power, once it is, to pick between forcing the deal and paying for its loss.
Ontario's Sale of Goods Act has its own, narrower specific performance provision, checked and found not to reach this dispute. Section 50 grants the remedy only “in an action for breach of contract to deliver specific or ascertained goods”, and the Act defines “goods” as “all chattels personal, other than things in action and money”. Shares are things in action; an entire going-concern business — goodwill, assigned contracts, an assigned lease — is not simply a parcel of chattels either. Applying s.50 to a share or business sale would be applying a real provision to the wrong unit, which is why the court's power here traces to CJA s.99, not the Sale of Goods Act.
The remaining question was purely contractual: did the termination fee cap the seller's remedy for this kind of breach, taking the choice under s.99 off the table before a court ever reached it? It did not, on the words the parties actually used. The fee attached to defined, narrow walk-rights, and nothing said it was the seller's sole and exclusive remedy outside those scenarios. An outright, unexcused refusal to close was not one of the events the fee was drafted for — so the s.99 choice between specific performance and damages remained genuinely open.
Facing a credible claim for specific performance — supported by a genuine uniqueness argument tied to the retiring owner's personal relationships with customers and the risk that a failed process would effectively end the business, and with the s.99 choice of remedy still live because nothing had capped it — the buyer chose to close rather than litigate the question through to a judgment. Most disputes of this kind resolve at exactly this stage, once the exposure becomes concrete, rather than at a full specific-performance trial.
Had the termination fee clause instead stated that it was the seller's “sole and exclusive remedy for any failure of Buyer to close”, the analysis above would not matter: the seller would have been capped at $100,000 regardless of how strong the uniqueness argument was, because the parties would have contracted away the court's s.99 choice in advance. That single sentence, present in many templates and absent from this one, is the entire difference between a seller who can credibly threaten to force the deal and one who cannot.
The tell was in what the termination fee clause did not say. It was drafted narrowly, around specific walk-rights, by counsel focused on the scenarios most deals actually use a break fee for — and nobody asked the separate question of whether it should also cap the seller's remedy for a buyer that simply refuses to close outside those scenarios. Silence on that point left the full s.99 choice of remedy on the table.
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