Contract
Representatives

SUMMARY

A contract representative is a party appointed to make decisions on behalf of a group of related parties to a contract. The most common type is a sellers’ representative.

BACKGROUND

An agreement, whether a non-binding agreement or binding agreement, requires at least two parties. 

An agreement between two parties is a bilateral agreement, and an agreement among three or more parties is a multi-lateral agreement.

In multi-lateral agreements where two or more parties are affiliated, the parties should consider appointing a representative of the affiliated group to act as the sole representative of the entire group.

ROLE

The contract representative should be capable of making binding decisions and taking other binding actions on behalf of the group.

Without such a representative, decision-making and dispute resolution can be particularly burdensome, time-consuming, and costly.

ILLUSTRATIVE EXAMPLE

A buyer purchases a target company from five sellers. After closing, the buyer presents its proposed final calculation of the purchase price to the sell-side. The parties must agree to the calculation before the true-up can be finalized.

If the sellers did not appoint a representative, the buyer will need to obtain sign-off from each individual seller before the post-closing purchase price true-up can be finalized. This may involve fielding numerous questions from each seller, and possibly having to negotiate with each. Sellers may have conflicting views and goals, too.

With a sellers’ representative, the buyer need only finalize the calculation with one party—the representative.

GENERALLY APPLICABLE

Contract representatives allow for single points of contact in agreements with affiliated parties, whether on the buy-side or sell-side.

Representatives may (and should) be used to efficiently move deals and post-closing matters forward whenever groups of related parties enter into a contract.