The Ontario Superior Court’s recent decision in Ironstone Product Development Inc. v. Virtual Possibilities Inc., 2026 ONSC 2127, is a vivid reminder that multimillion-dollar contracts can be formed by text message in the space of a weekend, and that transactional lawyers are often called in only after the binding handshake has already happened.

How an Agreement to Agree Became a Contract

In late March 2020, as the pandemic was declared, a federal procurement officer asked Virtual Possibilities Inc. (VPI), a Hamilton-based medical device marketing company, whether it could source 9.4 million surgical gowns for delivery by the end of May. VPI’s president, Mitch Wilson, immediately reached out to Joel Ironstone, an engineer who ran Ironstone Product Development Inc. (IPD) as a regulatory affairs and quality assurance consultancy. Mr. Wilson sent Mr. Ironstone a text message which ultimately decided the outcome of the case: “Gown suppliers – shall we tackle this?” Over a handful of days and a few text exchanges, they agreed to collaborate and to split the net profits 80.6% to VPI and 19.4% to IPD. VPI ultimately delivered the gowns and earned roughly $76.6 million in gross profit. It then refused to pay IPD anything, on the view that the deal was never finalized. Justice Akazaki found a binding contract and awarded IPD $10,229,782.

The Court applied the Bawitko Investments Ltd. v. Kernels Popcorn Ltd. framework, but emphasized its other side. An agreement to agree is unenforceable only where the written details are genuinely necessary to regulate the relationship, like a multi-year franchise. Where, as here, the parties’ relationship was a short, urgent, one-off venture, agreement on just two essential points (collaborate and share profits in a stated ratio) was sufficient. The unsigned draft prepared by IPD’s lawyer did not save VPI, if anything, the Court treated it as confirming that the essential terms had already been settled.

Officer Authority and the Indoor Management Rule

VPI’s main escape route at trial was Mr. Wilson’s insistence that he had told Mr. Ironstone the deal was subject to board approval. The Court accepted that, had this caveat been communicated, no contract could have formed. But Mr. Wilson lost that point on the evidence. There was no text confirming the caveat, his own contemporaneous email to the board accepted that he had bound the company “without confirming with the Board first,” and his offer to waive his dividend would have made no sense if his authority had truly been limited. The Court relied on the indoor management rule, codified in section 19 of the Ontario Business Corporations Act, to hold that Mr. Ironstone was entitled to assume Mr. Wilson either had authority or did not need it.

Net, Gross, and Substituted Entities

Two further points warrant attention. The eleventh-hour substitution of a newly incorporated numbered company in place of IPD as the contracting entity did not change who the counterparty was. The Court treated the swap as, at most, an attempt to vary an agreement already reached. The corollary is that the action against the related parent (Mariner) was also dismissed because the dealings were with VPI alone. The Court also bound the parties to the word net that appeared in Mr. Wilson’s early text rather than the word gross that appeared in the draft contract, even though net was significantly worse for IPD. Loose terminology in the first messages can lock in the economics of a deal.

Checklist for Counsel

1. If a client’s officer is negotiating a deal whose magnitude exceeds their internal authority, the limitation must be communicated to the counterparty in writing at the time, not reconstructed later.
2. Internal limits-of-authority policies should be drafted broadly enough to capture profit-sharing arrangements and joint ventures, not just borrowings and signing thresholds.
3. Coach clients that texts, emails and voice notes are contractual instruments, a one-line “subject to board approval and execution of a definitive written agreement” appended to any term-level exchange is cheap insurance.
4. Where a corporate group includes a marketing entity and an IP-owning parent, officers must be precise about which entity is acting.
5. When a contracting party wants to insert a new vehicle late in the process, that change has to be agreed, not assumed.

Takeaways for Transactional Counsel

The decision will not surprise litigators, but for the solicitor in the room when a client says “let’s just send him a text and sort the paper later,” Ironstone is the cautionary tale to keep close at hand, and a useful reminder that the role of transactional counsel is increasingly to slow down the deal just enough to make sure the client knows it is be