Anonymised, illustrative composite. Four sellers appointed one of themselves as “Sellers’ Representative” with authority to settle indemnity claims on behalf of the group — and no statute exists to second-guess what that clause actually said.
At a glance
Four siblings sold their family-owned specialty manufacturing business for $5,600,000, each holding roughly a quarter of the shares. To avoid managing indemnity notices and disputes among four separate people, the purchase agreement appointed the eldest sibling, who had led the sale process, as “Sellers’ Representative”. The clause gave the representative authority to receive all notices on behalf of the sellers and to “negotiate, compromise, settle or otherwise resolve any claim for indemnification” under the agreement, with settlement decisions binding on all four sellers. A separate provision had the three other sellers indemnify the representative personally for any liability arising from acting in that capacity, absent bad faith.
At month 14, the buyer notified a $180,000 claim over an inventory valuation dispute rooted in how obsolete stock had been counted at closing. The representative reviewed the claim, decided contesting it in full risked a worse outcome and higher costs, and settled with the buyer for $140,000, paid from the escrow. He did not put the settlement to a vote among his siblings first — the clause did not require him to. Two of the other three sellers believed the claim was overstated and would have pushed back harder; the third was indifferent. All three learned about the settlement after it closed.
$140,000 came out of a $250,000 escrow, reducing what the four sellers would eventually split by that amount, allocated among them in proportion to their original shareholdings regardless of who agreed with the settlement. Litigating the claim to a conclusion instead, on the representative's own estimate, would have cost an additional $35,000–$60,000 in professional fees against an uncertain outcome — a number the dissenting siblings disputed but could not test, because the decision was never theirs to make.
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 — as this one did, with no dollar threshold, no consultation requirement and no removal mechanism — the representative's decision binds the principals exactly as if each of them had signed it personally, whether or not they agree with it after the fact.
This is a genuinely different mechanic from the several-liability question that shows up elsewhere in this hub, which is about who among several sellers ends up paying a valid claim. Here the claim's validity and size were never tested at all — the question is entirely about who had the authority to decide that, and the answer sits in the four corners of the appointment clause rather than in any external rule that could override it.
The closest Ontario statute to an appointed-agent regime, the Powers of Attorney Act, was checked and does not reach this either: it governs the form of a formal power of attorney over property and the protection of third parties who rely on one in good faith, not the internal authority of a contractually appointed representative acting under a commercial agreement among the principals themselves. No provision of that Act, the Business Corporations Act or the Partnerships Act speaks to a sellers' representative clause of this kind.
The buyer was entitled to rely on the representative's authority as the agreement described it, and had no reason to know the other three sellers disagreed — nor would it have mattered if it had, since the clause did not condition the representative's authority on the other sellers' consent. The settlement stood. The two dissenting siblings' only theoretical recourse was against their brother personally, for exceeding whatever internal limits the family may have discussed but never wrote into the agreement — and the indemnity running from them to him for actions taken as representative made even that avenue narrow, since it excluded only bad faith, not a good-faith settlement decision they simply disagreed with.
Without a sellers’ representative clause at all, the buyer would have needed to obtain agreement, or a judgment, against all four sellers individually to resolve the claim — slower and more expensive for both sides, but incapable of producing a binding outcome three of the four never agreed to without their own participation. The clause traded that friction for speed, and speed is what it delivered; the sellers simply had not appreciated that the trade was unconditional.
The tell was sitting in the appointment clause itself, unread as anything but boilerplate at signing: it granted authority to “negotiate, compromise, settle or otherwise resolve” claims with no floor, no ceiling and no consultation duty. A clause granting that scope of authority to one person among several equal sellers is not a convenience provision — it is a decision, made once at signing, to let that person make every future decision alone.
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