A disclosure schedule is the set of attachments to a definitive purchase agreement that list the seller’s specific exceptions to its own representations and warranties — turning a broad promise into a precise, qualified one, and telling a buyer exactly what it is not being promised.
Representations and warranties in an Ontario purchase agreement communicate what the buyer is getting: accurate financial statements, no undisclosed liabilities, taxes filed and paid, no material litigation, employees paid current, functioning equipment, and required licences in place — and, in a share deal the list runs long, because the buyer is taking on the corporation’s entire history rather than picking specific assets. The disclosure schedule is what narrows each of those promises down to what is actually true. A schedule that carves out everything the seller has thought of “narrows the promise to almost nothing,” and the practical advice that follows from that is blunt: “read the exceptions before you read the promises, because that is where the risk actually sits.”
Two drafting details decide how much protection the schedule actually gives a buyer. First, whether a representation is qualified “to the seller’s knowledge” — language that shifts risk toward the buyer, since an undisclosed problem the seller genuinely did not know about is not a breach at all. Second, how long the representations survive closing: Ontario practice typically has business representations survive for a stated period, often a year or two, with a cap limiting the seller’s total exposure and a minimum threshold screening out small claims. An indemnity backed by none of that — no holdback, no security on a vendor note, no set-off right — is, as the same guidance puts it, “a promise” rather than real protection, whatever the disclosure schedule says.
A seller represents that there is no material litigation against the business, but its disclosure schedule lists a pending wrongful-dismissal claim from a former employee, filed three months before closing. Because the claim was properly disclosed on the schedule, the buyer cannot later claim the litigation representation was breached when the claim proceeds — the exception the seller disclosed did exactly the job it was drafted to do. Had the seller known about a second, undisclosed claim and left it off the schedule, that omission would be the actual breach, not the existence of litigation itself.
See also: Definitive agreement · Condition precedent · Business purchase agreement essentials.
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