A definitive agreement is the signed share or asset purchase agreement that turns a deal from a set of negotiated intentions into a binding contract — it is the document a buyer and seller are actually obligated to perform, once its conditions precedent are satisfied.
The letter of intent that precedes it does most of the opposite job. Ontario deal practice treats most of an LOI’s commercial terms as deliberately non-binding — the parties are not yet obligated to complete on the price or structure it describes — while the LOI’s exclusivity, confidentiality and cost-allocation provisions bind immediately. As that same guidance puts it, the LOI “creates a framework for the purchase agreement that follows,” and critically, “no binding obligation to complete the transaction arises until a formal purchase agreement is signed by both parties.” The definitive agreement is that formal document: full representations and warranties, indemnities, closing conditions, disclosure schedules and the mechanics of price adjustment all live here, not in the LOI.
Signing a definitive agreement for a share purchase can also pull the buyer into obligations it did not negotiate directly. Under the Canada Business Corporations Act, s. 146(3), a purchaser of shares that are subject to a unanimous shareholder agreement is “deemed to be a party” to that agreement on closing, whether or not it was shown a copy beforehand. If proper notice of the USA was not given before closing, s. 146(4) gives the purchaser up to thirty days after it becomes aware of the agreement to rescind the share purchase — a real, statutory reason a buyer’s counsel confirms USA disclosure as part of closing due diligence rather than leaving it to the representations alone.
A buyer and seller sign a non-binding LOI setting out price and structure, with binding exclusivity and confidentiality clauses. Over the following sixty days the buyer completes diligence and the parties negotiate a definitive share purchase agreement covering representations, a disclosure schedule, an indemnity cap and survival period, and closing conditions including landlord consent. Only once that definitive agreement is signed by both parties — not at the LOI stage — is either side actually obligated to close on the agreed terms.
See also: Condition precedent · Disclosure schedule · Exclusivity period.
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