Legal Question in Business Law in New York

Re: business brokers' non-disclosure agreements

You should have an attorney review both agreements and do so very soon. The way to sort this out is proper negotiation, but you need to figure out who has what rights before you go ahead and negotiate with either of the brokers. You are still in a good situation because you haven't done anything yet and both brokers will be very interested in getting a deal signed up. This can probably still be sorted out now, but will unquestionably be very expensive to sort out after you buy the business. You will need legal advice in connection with the purchase of the business anyway, so you may as well seek it at an early stage and have this issue dealt with.

I am available to discuss this further if you wish at (212) 695-6400.

Best regards,

Asi

Re: business brokers' non-disclosure agreements

What do the NDA's you have signed say? A typical NDA will define what is considered to be confidential information between the parties to the agreement. It would, or at least should, also indicate what items of information are not considered to be covered by the agreement. One of those typically listed in this exclusion is any information learned from another source without breaching a duty of trust with the other party to the agreement. These "exclusionary" provisions are also, typically, the common sense exclusions that a court would be likely to find as well. Therefore, if you bought the same business through broker 2 that broker 1 first "revealed" to you, you should be clear of any problems with broker 2, provided that the NDA you signed with broker 1 had a provision in it similar to that which I've outlined herein. But, this is really still too simplistic a response because there may be other provisions in the NDA's you've signed that may need to be considered. No one can give you an adequate answer to your question without first seeing the two NDA's and reviewing the terms and conditions contained in each.

Re: business brokers' non-disclosure agreements

I assume you are worried about being sued for a commission and breach of the duty of confidentiality by one of the two brokers you plan not to use.

The answer would lie in the language of the NDAs you signed with both brokers or, if they are silent on these points, in another type of agreement (retainer, engagement, finder's fee, etc.) that defines your obligations to such brokers you might have signed as well.

Normally, brokers try to protect themselves by making sure that they get a commission no matter how the deal comes about, but again, it's the contract that would govern the type of brokerage (exclusive or not), the buyer's duty to pay, and the exceptions to the buyer's duty not to use the information disclosed by the broker to circumvent him.

The practical solution to your dilemma is to either get both brokers to work out how they split their commission between themselves and release you from any liability or, failing that, at least get whichever broker you do use to indemnify you for any damages as a result of going through him. If he is eager to close on the deal, he will find a way to get you the protection you need. You may also want to have the seller make certain representations as to the brokers it used in the purchase agreement.

If you need your deal documents to be reviwed/drafted, give me a call.

Please note that this response is not legal advice and should not be relied upon as such.