A condition precedent is a specific event or requirement that must be satisfied, or waived by the party it protects, before either side is obligated to close a purchase agreement — the contractual exit doors built into a deal between signing and closing.
A well-drafted condition precedent, as Ontario purchase-agreement practice frames it, is never left open-ended: each one carries a deadline, names the party for whose benefit it exists, and states what happens if it is not met — typically an extension of the closing date, termination with the deposit returned, waiver by the protected party, or a holdback tied to resolving the issue after closing. Common conditions in an Ontario mid-market deal include satisfactory completion of due diligence, buyer financing approval, third-party consents such as landlord or franchisor sign-off, tax and WSIB clearances, and confirmation that key contracts and key employees will transfer with the business.
At private equity deal sizes, regulatory clearance is a condition precedent that SME transactions rarely encounter. Where the combined parties’ assets or Canadian revenues clear the statutory thresholds, the transaction cannot close before the notification and waiting-period requirements of the Competition Act, s. 123 are satisfied — a first thirty-day clock from the Commissioner receiving the required information, and, if the Commissioner requests supplementary information, a second thirty-day clock running from compliance with that request rather than from the request itself. A definitive agreement on a deal of that size will therefore make Competition Act clearance an express, non-waivable-by-either-party condition precedent, with its own outside date.
A buyer and seller sign a definitive agreement for a platform acquisition that is large enough to trigger Competition Act notification. The agreement makes clearance a condition precedent for the benefit of both parties — neither can waive it unilaterally — with an outside date ninety days out. If the statutory waiting period runs its course without the Commissioner objecting, the condition is satisfied and the deal closes on schedule; if the outside date passes first, either party can walk without breaching the agreement.
See also: Definitive agreement · Disclosure schedule · Landlord consent as a closing condition.
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