Vendor

How BC law treats it

In a share or asset purchase, the vendor's obligations are set by the agreement. The vendor gives representations and warranties about the business, indemnifies the buyer for breaches and specified liabilities, agrees to covenants about running the business until closing, and delivers closing documents such as share certificates, resignations, releases and bills of sale. A non-competition covenant given by a vendor on the sale of a business is judged more leniently than an employee non-compete (Payette v Guay inc). For goods, the Sale of Goods Act implies conditions about title, description, quality and fitness unless the contract validly excludes them. For land, the general rule is caveat emptor: a vendor need not disclose patent defects, but must disclose known latent defects that make the property dangerous or unfit for habitation, and must not misrepresent or actively conceal problems (Nixon v MacIver). Tax rules add obligations. A non-resident vendor of taxable Canadian property, including BC real estate and some private company shares, must deal with section 116 of the Income Tax Act, and the buyer may have to hold back part of the price until a clearance certificate is issued. The vendor of land signs the Form A freehold transfer as transferor and must discharge financial charges on completion.

What it means for your business

For a business owner selling a company or property, the purchase agreement defines how much risk follows them after closing. Broad warranties, a long survival period, uncapped indemnities and a wide non-compete can turn a sale into years of exposure. Vendors should prepare a thorough disclosure schedule, then negotiate caps, deductibles and survival periods, and confirm tax treatment before signing. Example: The owner of a Surrey HVAC business sells its shares and gives warranties that survive 18 months with a cap of 25 percent of the price. When the buyer later discovers an undisclosed warranty claim from a customer, the vendor's liability is limited to the agreed cap.

Risks and common mistakes

Giving broad warranties without a detailed disclosure schedule listing known exceptions. Agreeing to uncapped indemnities or survival periods that run until the limitation period expires. Failing to disclose a known dangerous latent defect when selling land or a building. Overlooking section 116 obligations as a non-resident vendor, leading to holdbacks at closing. Accepting a non-compete broader in time, territory or scope than needed to protect the buyer's goodwill.