No brokers: Overview, definition, and example
What is no brokers?
A "no brokers" clause in a contract stipulates that no broker, agent, or intermediary is involved in the transaction, or if one is involved, they are not entitled to a commission, fee, or any other form of compensation. It essentially ensures that the parties to the contract are entering into the agreement without the involvement of a third-party broker who might claim a financial stake in the deal.
Why is no brokers important?
This clause is important because it helps prevent claims for broker commissions or fees that might arise later. It ensures that the parties involved are aware that they are not liable for paying any broker fees unless specifically agreed to in the contract. Additionally, it protects against disputes over undisclosed third-party involvement or payments.
Understanding no brokers through an example
A company enters into a partnership agreement with a supplier to provide raw materials. The contract includes a "no brokers" clause to clarify that neither party used a broker to negotiate the deal, and no broker fees are owed. If the supplier later claims that a broker was involved and should be paid a commission, the clause helps avoid such a claim by making it clear that no brokers were involved in the transaction.
Example of a no brokers clause
Here’s how a no brokers clause may look like in a contract:
Each party represents and warrants that it has not engaged any broker, agent, or intermediary in connection with this agreement, and no broker, agent, or intermediary is entitled to any commission, fee, or other compensation in connection with this transaction.
Conclusion
The no brokers clause protects parties from unexpected claims for fees or commissions from third parties. It ensures that the agreement is clean and free from external financial claims, which helps avoid future disputes over broker involvement. If you’re entering a deal, this clause can give both sides peace of mind about the terms of compensation and third-party involvement.
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.