Any business broker who has been in the industry long enough has been cut out of a deal in which they should have been paid a commission.\u00a0 These deals usually follow a familiar pattern – the broker works for months if not years to try to sell a client\u2019s business, then (usually after the listing agreement is terminated) later finds out that one of its contacts has purchased the business, but the broker\u2019s commission has not been paid.\u00a0 A broker who finds himself in this situation must weigh practical considerations (whether to sue a former\/potential future client, the potential recovery, whether the potential defendants have sufficient assets to go after, the uncertainty of litigation, the risk that doing nothing could encourage others to cut the broker out of deals in the future, etc.).\u00a0 However, once the decision is made by the broker to try to collect unpaid commissions through litigation, the question would be what claims could be brought against the buyer and\/or seller of the business.\u00a0 Fortunately for business brokers, there are a number of claims that are available under Texas law which allow business brokers to recover unpaid commissions against either the buyer or the seller, or both.\u00a0 The first and most obvious claim that a broker could assert against both the buyer and the seller to recover unpaid commissions would be for breach of contract.<\/p>\n
Under Texas law, there are four basic requirements to proving the existence of a legally enforceable contract:<\/p>\n
Of course, a written agreement is much more desirable than an oral agreement, as it allows the parties to avoid a swearing match as to what the terms of their agreement were. Nonetheless, it is possible for parties to satisfy all four of the elements listed above through an oral agreement.<\/p>\n
In the event that the broker did not have the buyer and\/or seller sign written agreements, there are other claims which may provide a basis for the broker to recover unpaid commissions.\u00a0 Quantum meruit (sometimes referred to as unjust enrichment) is a quasi-contractual claim which could be asserted against a buyer and a seller.<\/p>\n
To recover under the doctrine of quantum meruit, a plaintiff must establish that:<\/p>\n
In the case of a broker who brings suit against a buyer and\/or seller, the broker can certainly argue that it provided brokerage services by facilitating the sale of the business, and that the buyer and\/or seller both benefitted from the sale and were aware that the broker expected to be paid for these brokerage services.<\/p>\n
Non-contractual claims (also known as tort claims) may also provide a broker with a basis for recovery of unpaid commissions against a buyer and\/or seller.\u00a0 Fraud and\/or negligent misrepresentation claims might be available in cases where the broker was intentionally misled by the buyer or seller about the status of negotiations between the parties.\u00a0 For instance, if the broker was told by the buyer or seller that they were not interested in or actively negotiating a deal for the business, when in fact they were, and the broker relied on these statements to terminate a listing agreement with the seller, fraud or negligent misrepresentation claims could be alleged.<\/p>\n
Tortious interference is also a claim which could apply to require a buyer who purchased a business to pay the broker\u2019s commission.\u00a0 In Texas, the elements of a cause of action for tortious interference with contractual relations are:<\/p>\n
Depending on the facts of the case, there are other claims that could be used to recover a business broker\u2019s unpaid commissions from a buyer and seller of a business, such as promissory estoppel, conspiracy and fraudulent transfer, but I\u2019ll save those for another day.<\/p>\n
About the Author:<\/b> My name is Josh Borsellino, and I am a Texas trial lawyer that handles business litigation, employment law and personal injury claims.\u00a0 I worked for many years at one of Texas\u2019 largest and most prestigious law firms, Haynes and Boone, before starting my own firm.\u00a0 I have successfully represented several business brokers in claims for unpaid commissions, and have handled such claims on either an hourly or a contingency basis.\u00a0 If you are a business broker and have questions about whether you may be entitled to unpaid commissions, call me at 817.908.9861 for a free consultation.<\/p>\n","protected":false},"excerpt":{"rendered":"
Any business broker who has been in the industry long enough has been cut out of a deal in which they should have been paid a commission.\u00a0 These deals usually follow a familiar pattern – the broker works for months if not years to try to sell a client\u2019s business, then (usually after the listing…<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3883],"tags":[],"_links":{"self":[{"href":"https:\/\/dfwcounsel.com\/wp-json\/wp\/v2\/posts\/881"}],"collection":[{"href":"https:\/\/dfwcounsel.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/dfwcounsel.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/dfwcounsel.com\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/dfwcounsel.com\/wp-json\/wp\/v2\/comments?post=881"}],"version-history":[{"count":0,"href":"https:\/\/dfwcounsel.com\/wp-json\/wp\/v2\/posts\/881\/revisions"}],"wp:attachment":[{"href":"https:\/\/dfwcounsel.com\/wp-json\/wp\/v2\/media?parent=881"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/dfwcounsel.com\/wp-json\/wp\/v2\/categories?post=881"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/dfwcounsel.com\/wp-json\/wp\/v2\/tags?post=881"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}