Changes to Standard Form Business Purchase Agreement
The Bulk Sales Act in Ontario was repealed effective 22 March 2017.
The standard form Agreement for the Purchase of a Business drafted by OREA is a document prepared with the expectation that the Bulk Sales Act would apply.
There is an obligation to use “current forms” under s. 34 of the Code of Ethics. At this moment, the OREA Form is out of date. In fact, the requirement to use current forms has nothing to do with OREA at all, however, they are the major supplier.
The Bulk Sales Act was designed to protect unsecured trade creditors. With its repeal, the provisions and the protections contained within it no longer apply.
It is therefore important to avoid any misunderstandings going forward. Parties are expected to know the law and know that the Act was repealed and no longer “in force”. So, the question would be:
did the parties intend to import the provisions of the old repealed Act into their deal?
The reason to support this would be the fact that they made reference to the Act in their Agreement notwithstanding that the Act was repealed. The simple mistake would be using one of the old forms.
Thus, the challenge in the interim before “new forms” are available is to eliminate this risk.
Clause to be added to Schedule “A”
Consider adding a paragraph like the following:
Deletion of Bulk Sales Act References
The parties acknowledge and agree the following Amendments shall be made to the Agreement on account of the repeal of the Bulk Sales Act on 22 March 2017:
1) The name of the Document shall be: Agreement of Purchase and Sale –Business,
2) The maximum deposit shall not be limited to 10% of the Purchase Price,
3) Paragraph 7(f) shall be amended by deleting the words “or in the statement to be delivered pursuant to the Bulk Sales Act”,
4) Paragraph 8 (b) shall be deleted,
5) Paragraph 8 (d) shall be amended by deleting the words “or in the statement delivered pursuant to the Bulk Sales Act”,
6) No references in any other documents, material, attachments, schedules, or appendixes to this Agreement referring to the Bulk Sales Act shall have any force or effect unless specifically stated to be included and to supersede the provisions of this Deletion of Bulk Sales Act References clause.
You appreciate that if the Act applied and there had been a Court order made, that that Court order would continue to apply to the situation notwithstanding the repeal of the Act. In those cases, the parties should be aware of its application and may wish to attach a copy of that Court Order as a Schedule to their Agreement. They should use an override provision.
Otherwise, we are simply awaiting an OREA updated Business Agreement Form.
Brian Madigan LL.B., Broker