No finder’s fees: Overview, definition, and example
What are no finder’s fees?
"No finder’s fees" is a term used in contracts or agreements to specify that no party will be paid a fee for introducing, referring, or facilitating a business deal or transaction. In other words, it means that the parties involved agree not to pay or receive a commission for connecting potential buyers, sellers, or business partners. This term is typically used to avoid disputes about payments for referrals or introductions that could be seen as unnecessary or excessive.
For example, if your business enters into a partnership agreement with another company, the agreement may include a "no finder’s fees" clause, indicating that neither party will owe a fee to a third party who simply helped facilitate the introduction or the deal.
Why is "no finder’s fees" important?
The "no finder’s fees" clause is important because it helps clarify the terms of the transaction and prevents any confusion or unwanted costs related to intermediary introductions. It ensures that only the parties directly involved in the deal are responsible for compensation. This clause can prevent additional unexpected expenses and help maintain fairness in the contract.
For SMBs, including a "no finder’s fees" clause can help manage expectations and avoid having to pay fees to third parties who might claim to have helped facilitate the deal, even if their involvement was minimal or not essential.
Understanding "no finder’s fees" through an example
Imagine your small business is entering into a contract with a supplier. You’re working directly with the supplier and have negotiated the terms of the agreement yourself. However, a third party claims that they helped introduce you to the supplier and expects to receive a finder’s fee for their "services." By including a "no finder’s fees" clause in your contract, you make it clear that no fees will be paid to any third party who wasn’t directly involved in negotiating or facilitating the deal.
In another example, your business is raising capital and someone outside the company claims they helped find investors. To prevent any misunderstandings, the agreement might state "no finder’s fees," so the company is not obligated to pay a commission for simply introducing investors without playing an active role in the investment process.
An example of "no finder’s fees" in action
Here’s how a "no finder’s fees" clause might be written in a business agreement:
“The parties agree that no finder’s fees or commissions shall be paid to any third party for introducing, facilitating, or referring this agreement. The undersigned parties confirm that all negotiations have been conducted directly between them, without intermediary fees.”
Conclusion
A "no finder’s fees" clause is used to specify that no commissions or fees will be paid to third parties for merely introducing or facilitating a deal. For SMBs, this clause is important for avoiding unnecessary costs, ensuring clarity in transactions, and protecting the business from potential claims of third-party involvement. By including a "no finder’s fees" clause, businesses can prevent misunderstandings and maintain fairness in their agreements.
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.