No broker’s fees: Overview, definition and example
What is "no broker’s fees"?
"No broker’s fees" refers to a provision in an agreement where the parties affirm that no brokers, finders, or intermediaries were involved in facilitating the transaction, or that any such fees are the responsibility of one specific party. This clause ensures that neither party is liable for unanticipated brokerage or finder’s fees unless explicitly stated in the agreement.
The provision is commonly included in contracts such as real estate, mergers and acquisitions, or financing agreements to avoid disputes over the payment of brokerage or finder’s commissions.
Why is "no broker’s fees" important?
The "no broker’s fees" clause is important because it clarifies the parties’ obligations regarding brokerage fees and protects them from unexpected claims. For buyers, sellers, or contracting parties, this clause ensures that neither is held liable for fees unless they have explicitly agreed to them.
In addition, the clause helps establish transparency in the transaction and mitigates the risk of disputes with third parties claiming fees for brokering the deal. By clearly stating the responsibilities for broker’s fees, the parties can prevent misunderstandings and protect their financial interests.
Understanding "no broker’s fees" through an example
Imagine two companies agree to a merger, and the merger agreement includes a "no broker’s fees" clause. Both companies confirm that no brokers or intermediaries facilitated the deal, ensuring that neither party will face unexpected claims for commission payments from third parties.
In another example, a property buyer and seller execute a real estate purchase agreement. The "no broker’s fees" clause specifies that the buyer will not be responsible for any brokerage fees and that the seller assumes full responsibility for any fees owed to their broker. This protects the buyer from liability for the seller’s brokerage arrangement.
An example of a "no broker’s fees" clause
Here’s how a "no broker’s fees" clause might appear in a contract:
“Each Party represents and warrants that no broker, finder, or other intermediary has been engaged by or acted on behalf of such Party in connection with this Agreement. Each Party agrees to indemnify and hold the other harmless from any claims, liabilities, or expenses (including reasonable attorney’s fees) arising from any breach of this representation and warranty.”
Conclusion
The "no broker’s fees" provision is an essential part of many agreements, clarifying the responsibilities of the parties and protecting them from unexpected claims by third parties. By including this clause, the parties ensure transparency, reduce financial risks, and avoid disputes over brokerage or finder’s fees. A well-drafted clause safeguards all parties and promotes smooth execution of the transaction.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.