When Is A Sale Not A Sale?

The term "sells" seems straightforward. Interpretation of what constituted a sale turned out controversial, however, in the recent case of Project Freeway Inc. v. ABC Technologies Inc., 2025 ONSC 1048 ("Project Freeway"), which involved sale and leaseback ("SLB") transactions. The case provides insight into how commercial purpose informs courts' interpretation of contractual provisions.

Nature of the Dispute

The dispute in Project Freeway arose from a share purchase agreement (the "SPA") between Project Freeway Inc. ("PFI") and ABC Technologies Inc ("ABC Tech"). The SPA included an earn-out clause, which entitled PFI to receive additional payments based on the financial performance of the acquired business over a specified period. Importantly, the SPA stated that the full earn-out would become immediately payable if ABC Tech "directly or indirectly, sells, transfers or licenses a material portion of the assets of the Business of the Target Companies in one or a