Legal Updates

‎‎‎‎‎‎‎‎Avoiding a middleman so as to circumvent a right of the middleman to fees creates a right to fees

September 3, 2017

A middleman brought together two companies to examine the possibility of a transaction for sale of assets of one of them. The transaction fell through but seven months later the purchaser approached the seller and offered to purchase some of the assts.  The negotiation was successful and an agreement was executed but without involvement of the middleman.

The Supreme Court held that absent a written agreement between a middleman and a party to a transaction one must show that the middleman was a significant factor in the transaction.  Here no written agreement exists between the middleman and the seller and the middleman's role was only in in creating the initial meeting. However, the middleman continued to contact the companies during the year following the meeting in order to promote the transaction and the companies pushed him away.  When a party prevents the fulfilment of a condition precedent such party will be deemed to have breach a contract and thus the middleman is entitled to fees although he was not the significant factor in the transaction that was finally executed.