Anonymised, illustrative composite. The seller fired its broker, closed the sale eight months later with a buyer the broker had introduced, and owed the full success fee anyway.
At a glance
A London, Ontario-area bulk fuel and lubricants distributor engaged a business-brokerage advisor under a twelve-month exclusive engagement letter to run a sale process, structured from the outset as a sale of the target's shares. The letter set a tiered success fee — specific to this engagement, not a market standard — of 8% on the first $2M of consideration and 4% on the balance, and it included a standard tail provision: if, within twelve months after the engagement ended, the seller completed a transaction with a party the advisor had introduced, or with whom the advisor had contact on the seller's behalf during the engagement, the full fee was owed as though the advisor had closed it.
In month four, the advisor introduced a mid-sized regional buyer. That buyer reviewed preliminary financials, met the owner once, and passed. Diligence with two other prospects went nowhere over the following months, and after nine months without a signed letter of intent the seller terminated the engagement for convenience, as the letter permitted.
Eight months after termination — seventeen months after the engagement began — the seller closed a sale. The buyer was the same regional buyer the advisor had introduced in month four. According to the seller, that buyer had re-approached independently five months after termination, through a mutual industry contact, and the final price and terms were negotiated directly between the parties with no involvement from the advisor at all.
The advisor invoiced the full success fee under the tail clause. The seller refused, on the view that eight months had passed, the advisor had done nothing to bring about this particular closing, and the terms bore no resemblance to anything discussed during the engagement. The advisor's counsel pointed to the clause as written: it did not ask what caused the eventual deal, only whether the buyer had been introduced by, or had contact with, the advisor during the engagement's term. This buyer had.
The transaction closed at $7.4M. Under the engagement letter's own fee schedule, 8% of the first $2M ($160,000) plus 4% of the remaining $5.4M ($216,000) totalled $376,000. The tail period ran twelve months from termination; the closing fell at month eight of that window, comfortably inside it.
The seller's counsel checked first whether a statute governs this kind of engagement at all, rather than assuming the engagement letter was the whole answer. Ontario's brokerage advisors selling businesses are sometimes also registered real estate salespeople, and the province's real estate and business brokerage statute — named, since a 2023 rebrand, the Trust in Real Estate Services Act, 2002 and before that the Real Estate and Business Brokers Act, 2002 — is the obvious first place to look, given a name that expressly claims to cover business brokers. It defines “trade” to include “a disposition or acquisition of or transaction in real estate by sale, purchase, agreement for purchase and sale, exchange, option, lease, rental or otherwise,” and confines its registration requirement and its Code of Ethics to exactly that — trades in real estate. A sale of all of the target's shares is a disposition of securities, not of real estate, even though the target itself may own real property; the shares change hands, the real estate does not. The statute's own s.5(1)(c) makes the same boundary explicit from the other side, exempting a person registered under the Securities Act from needing real-estate registration for a trade made as part of a securities business. Ontario law treats a real estate trade and a securities trade as two different regimes; this engagement was the second kind, so the first statute never engages.
With that statute checked and ruled out, and no other Ontario or federal statute found to govern a post-termination tail fee in a business-advisory engagement letter, the clause really is the entire rule. Canadian courts interpret a commercial contract by its plain and ordinary wording rather than by importing conditions the parties did not include. This engagement letter's tail clause conditioned the fee on the identity of the counterparty during the tail period — introduced by, or in contact with, the advisor during the term — and said nothing about whether the advisor's efforts caused, contributed to, or even resembled the deal that ultimately closed.
That is a deliberate, common drafting choice, not an oversight. A causation-based tail — fee owed only if the advisor's work can be shown to have led to the closing — invites exactly the dispute this file describes: a seller and a returning buyer with every incentive to agree, months later, that the advisor's earlier introduction had nothing to do with it. A buyer-identity tail avoids that dispute by asking a question of fact the seller cannot spin: was this counterparty on the list.
Counsel reviewed the clause and advised the seller it had no basis to withhold payment. The fee was paid in full within thirty days, along with interest the letter separately provided for on late payment. The seller's later engagement letter for an unrelated transaction still used a tail clause, but shortened the window to six months and added a narrower definition of “introduced” requiring a documented contact — a negotiated change in scope, not a rejection of the concept.
The tail clause exists precisely because, absent one, a seller could time a termination to fall just before closing a deal the advisor had actually sourced, and pay nothing for the introduction that made it happen. Had this engagement letter been silent on post-termination fees, or used a narrower trigger tied to formal written introductions only, the advisor would have had a real risk of losing the entire $376,000 fee on a deal it had, on any fair reading, originated — regardless of who negotiated the final price. The clause is what converts that risk into a plain factual question with one answer.
The tell was the timing of the reintroduction, not the terms of the final deal. A buyer who reviewed financials, met the owner, and passed in month four does not typically resurface independently five months after the seller's advisor has been let go, through a conveniently mutual contact, on a deal that ultimately mirrors the target the advisor had originally sourced. The clause did not need the seller's account of events to be untrue to apply — it applied regardless of whether the reintroduction was coincidence or convenience, which is exactly why it was drafted around buyer identity instead of motive.
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