Ahh, the non-circumvent non disclosure agreement. Why do we have them? If buyers and sellers will still circumvent you, what is the point? Well, for one thing, it gives those bringing the opportunity some measure of comfort knowing that there is something in writing should they have to take legal action. An NCND is designed to help ensure that the reps opportunity will not be pursued by the buyer without the reps’s involvement. However, having one does not always guarantee protection.
Now, I am not an attorney or pretend to be one, although I was raised in a family of one. Having the buyer sign an NCND demonstrates the buyers willigness to establish a relationship with you and respect your position in the transaction. Are they legally valid? Some would dispute that assertion but having it nonetheless shows evidence of a paper trail.
NCND’s come in many forms so the best advice I could give you is find one and have your attorney modify it as desired. Always have an attorney review your NCND. It will be the best $150 you ever spend.
Some NCND’s are specific to an opportunity or cover all opportunities. Most buyers prefer to have it specific to an opportunity because many will simply not sign one that includes a buyer’s pre-existing relationship with a seller they might have talked to in the past. Of course, the buyer will not know this until after they sign one which is why it needs to be specific to an opportunity or the language in your blanket NCND needs to be changed to reflect pre-existing relationships.
Still, there are ways to get around an NCND.
1. Buyer signs NCND. Buyer shows strong interest, speaks to the seller but then never pursues the opportunity. Buyer has a friend or colleague call the buyer and try and do a deal under a different buyer/company name.
2. Buyer won’t sign an NCND until they speak to the buyer. If they won’t sign one, don’t expect them to sign an LOI or MFA. Do not introduce your seller to this buyer. They will circumvent you especially since there is nothing in writing.
3. Buyer signs. Speaks to seller now neither party is responsive to your calls. They are trying to work a deal directly without your participation.
4. Seller’s rep calls your buyer directly and offers to drop a point off the fees if they deal directly with the seller’s rep. Instead of a split on fees, the seller’s rep is now keeping 2 pts of the fee for themselves and the buyer gets a 1 pt discount.
If any of the above occur, you will probably never know it.
How do you protect yourself?
It helps to have a strong relationship with your buyers or sellers. I have closed transactions with many of my sellers so they know I have buyers that can perform. They also know I have a huge network of buyers. This encourages loyalty. I trust sellers more than I do buyers.
What happens if you have evidence that your NCND has been violated?
You can sue but that can be very costly and the buyer/seller knows this. Some do take legal action but remember, it’s you up against a company that has millions of dollars behind them. Are you prepared for a costly and long drawn out fight? Buyer/seller are counting on you not incurring legal fees and the long process of legal action. They could certainly afford the legal bills, can you? I am not discouraging you from taking action but you should know what you are up against if you do pursue this course of action. Take comfort in know that there are reps that have sued and successfully won after a year long battle. I know a few of them personally.
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