Can a sellers' representative clause bind a shareholder who never agreed to how a claim was settled?

The rule

There is no Canadian statute that creates, defines or supervises a “sellers' representative” role in a private business sale. It exists only because the purchase agreement creates it, and it means only what the clause says. A sellers' representative clause is an exercise in ordinary agency law: the sellers, as principals, grant the representative actual authority to act and to bind them within whatever scope the clause defines.

Where the clause grants unconditional settlement authority — no dollar threshold, no consultation requirement, no removal mechanism — the representative's decision binds the principals exactly as if each of them had signed it personally. The closest Ontario statute to an appointed-agent regime, the Powers of Attorney Act, governs the form of a formal power of attorney over property and the protection of third parties relying on one in good faith — not the internal authority of a contractually appointed representative acting under a commercial agreement among the principals themselves. Nothing in that Act, the Business Corporations Act or the Partnerships Act speaks to a sellers' representative clause of this kind.

When this changes

A dollar threshold requiring consultation above a stated amount, a majority-consent requirement for settling a claim, or an express removal mechanism all narrow the representative's authority and give a dissenting seller real leverage. Absent any of them, the clause's plain words — not the dissenting seller's after-the-fact objection — decide the question, because this is agency law, not a vote.

Where this plays out in the Case Files

These questions come up because a specific deal turned on them. Three from this hub:

• • One sibling settled the indemnity claim; the other three never agreed to it — one sibling's settlement of an indemnity claim binding three others who never agreed to it, under an appointment clause with no dollar threshold and no removal mechanism.
• • Four sellers, several liability, and a valid claim the buyer only partly collected — a genuinely different mechanic among multiple sellers — who pays a valid claim, rather than who had authority to decide it was valid in the first place.

Sources

• • No Canadian statute governs a sellers' representative's authority to settle indemnity claims on behalf of a selling group; checked against the Business Corporations Act, Powers of Attorney Act and Partnerships Act, none of which reach an internal agency appointment made by contract among the principals themselves.
• • Treadstone Law's library does not have an article specifically on a sellers' representative clause or its authority to bind dissenting co-sellers; no link is included for that reason.