Title to assets representation

In an asset purchase the buyer pays for specific equipment, inventory and other property, so the buyer needs the seller to say it owns them outright. The title to assets representation is that statement, which can be paired with a list of exceptions in a disclosure schedule. It is a contract promise, so it is only as useful as the claim terms around it.

What the statutes show

Ontario’s Sale of Goods Act (s. 13) says that in a contract of sale of goods, unless the circumstances show a different intention, there is an implied condition that the seller has a right to sell, and an implied warranty that the goods are free from any charge or encumbrance in favour of a third party not declared or known to the buyer. Those implied terms concern goods and belong to Ontario. Other provinces have their own sale of goods law, and a written representation can reach further.

How a buyer tests it

• Order a registry search. Ontario’s Personal Property Security Act (s. 43) has the registrar issue a certificate when any person requests a search of the debtor name indexes and pays the required fee. British Columbia and other provinces run their own Acts and registries.
• Ask what a registered security interest secures: the Ontario Act defines it as an interest in personal property that secures payment or performance of an obligation.
• Ask whether inventory is sold in the ordinary course, since the Ontario Act’s s. 28(1) lets a buyer of goods from a seller who sells them in the ordinary course of business take them free from a security interest given by the seller, unless the buyer also knew the sale breached the security agreement.

A lien search is one way to run that check, and how to check for liens on business assets walks through it.