Ep. 28 | How To Keep Someone From Cutting You Out of Your Deal or Fee

On this episode of The Mobile Home Park Lawyer, Ferd talks about non-circumventing agreements. Ferd goes through the three categories involved and explains why they are important to ensure people don’t go around you to get a deal. Enjoy!

“The goal is to make sure that if you have something of value, you have some information, when you disclose it you want to make sure that the person can’t go around you.”

HIGHLIGHTS:

0:00 – Intro 1:09 – A non-circumventing agreement is to stop someone from going around you in a deal, and cut you out of your fee 2:31 – After the parties and date are established you move onto the whereas clause 3:31 – There are three categories in a non-circumventing agreement, the first category establishes who is involved in the agreement 5:04 – Category 2 references the confidential information 6:21 – Category 3 is miscellaneous stuff like relationships of parties 7:29 – Rather than sue and go to court, do arbitration 8:19 – You have your general provisions, which you can find discussed in the previous episode

FULL TRANSCRIPTION:

Welcome back mobile home park nation. Here again today, going through some more exciting and thrilling legal documents. I know you guys love this stuff. So here we go. Today, we’re going to teach you how, and really talk about the documentation you need to keep from having somebody go around you and cut you out of your deal or cut you out of your fee. And the legal name for this would be a non-circumvention agreement. We’ll follow this up with some, with an episode on assigning a contract, and that’s something where you definitely want people going around you. So, we already covered the non-disclosure agreements. Typically, you’ll get that teed up first and then you’ll have a non-circumvention agreement. So, what does this mean? Basically, this is meant to, to prevent people from circumventing you, or going around you to get to the information that you hold or get access to whatever you’re trying to provide. And you don’t want to do that because then they may cut you out of the deal. So, in the last episode I was giving an example of like my cell phone number. Well, if I’ve made you sign a non-disclosure that I’m going to share my cell phone number. If it’s like, you know, it’s like this mystical thing, I’m going to share this information on this property or the address or the pricing or the rent roll or whatever else, I may want to give you a nondisclosure agreement, I probably will. But in addition to that, before I give you the real fruit and the real special sauce of what I’m going to potentially disclose, I’m going to make sure you don’t go around me. So this would be like, if I have a property in Kansas City, Missouri, that I know is going to, it was coming for sale, or I know the owner I’m going to, we’ll share information about it. Perhaps because I’m debating, if I’m going to try to get it tied up, if it’s worth my time to tie it up and to get it under contract, to then potentially assign to you or someone else. But I don’t tell you what property it is. So, I’m gonna be purposefully be vague at times. So, in the document, I’m going to have my standard, like here’s the parties, here’s me, here’s you. And then I’m going to have the date, then really, I want to jump into the whereas clause. And the whereas clause is really the purpose of what we’re working on. So I may say hey, we’re going to look to collaborate on the purpose of a mobile home park located in the midwest or locate, maybe I haven’t say located in Missouri to be more fully disclosed within 24 hours of receipt of an executed agreement from the recipient of an executed agreement. So not going to get it so granular to say Kansas City that might tip you off. I’m certainly not going to say the 82-space park located at 123 Main Street in Kansas City, Missouri, because if you’re a bad person, you may cut me out of the deal and basically screw me or take advantage of the information that I’m providing and I’m providing value. I provide value, in this case, a lead, I should get paid. That’s fair, right? I’m not getting paid for this podcast, but if I’m providing value in convincing you, you may hire me to draft this document for you. I already have this document; you may hire me to give you a template of it. Or you may hire me for something else. So, if you’ve got information that is of value to somebody you want to try to get paid for it and get paid reasonably for it. So, there’s really three categories here when you cover non-circumvention agreements. Number one is just your category 1, non-circumvention agreement. It basically says, here’s the information that I’m going to provide. You know, here’s the contacts who are allowed to have it, you know, is your company allowed to have it. If you’re the vice president of Coca-Cola, could everybody get it or just you and the vice-president and the hire. You’re going to have to have a term in there about the term of the agreement, how long has it in play? And then the you know, the commission or fee agreements, you see these a lot where wholesalers or signers will say like hey, I’ll give you information, but you know, the price is a hundred thousand for the property. So, you got to pay me 3% on top, or the price is 120,000, but that includes my fee. And you’ve got to be careful on the fee, commissioner fee, depending on the state, depending on your status. Because like, so for example, if you tried to charge a commission on real estate and you’re not a licensed real estate agent, they call a real estate salesperson or a real estate broker here. So, I have my broker’s license and I have two guys that are salespersons underneath me. And the three of us we’re allowed to take commissions. But there’s limits on that even, but me and my wife for example, is not a registered salesperson or broker. So, she is not allowed to take real estate commissions in Missouri and dependents, the penalty for that maybe you lose your license. Well, that means nothing. You don’t have your license and you can’t, you’re going to take nothing away from me.nAnother state may say you’re practicing X, you’re practicing realty. You’re practicing law without a license, and there may be criminal or financial penalties. So, you got to be careful on that. Category 2 is just referencing the confidential information. And this is things like trade secrets, other confidential information, proprietary information, and then talks about some of the penalties of unauthorized disclosure and things like a junction. We covered that in the non-disclosure agreement. So, I’m not going to belabor it again here. Talk about the applicability of the agreement. So, I am going to get back to my example, if I’m the vice president of Coca-Cola and I’m trying to buy this property, and I’m the one signing this I need to represent, and that’s in the last category about jumped to it, signatory block, central block, you need to say, who’s the disclosing party. Who’s the recipient. Typically, this is more one-way non-circumvention as opposed to the non-disclosure agreement which was mutually beneficial. So, if it’s John Smith, Vice President of Coca-Cola, he should be able to say, I am representing all of Coca-Cola. So back into applicability, that means his entire staff. For example, cannot circumvent me to get information on this. So, he’s signing off. He or she and you need to make sure they have the proper authority. And then somewhere under the NDA, you want to make sure there’s a provision in here for return of confidential, return of confidential information, either shredding it or actually returning physical copies. And then your category 3 is really just your miscellaneous stuff. You know, the relationships with the parties like hey, we’re not partners. You know, there’s no warranties on the information I’m giving here. Stuff like if you break this, this document you breach, and I win, and I sue, you’d pay my legal fees, attorney’s fees. That’s in a lot of documents, honestly, the whole paying for attorney’s fees thing, it almost never happens. It’s called The American Rule. In Great Britain, you know, where a lot of the common law and legal structure that we use came from, in places like that in Europe, they often say the prevailing party also gets their legal fees returned to them. So, I think this is used as really a deterrent for frivolous litigation. In the United States they just say, both parties pay their own fees. There are limited exceptions to that, things like violation of civil rights act. And then sometimes there’s statutory categories. Like if you’re in X business and you know, I don’t know, shipping containers or something and the other guy stiffs you and you win a lawsuit, you get your legal fees. But in general, I see that document all the time. I don’t mind signing it. I have it in some of my documents, but it’s one of those, you know, probably invalid provisions. I typically put in my documents in arbitration provision. So rather than, hey sue and go to civil court, go to arbitration. Arbitration is going to be a lot less brain damage, a lot cheaper. Ah, man lawsuits suck. I would, nobody wins in a lawsuit except for the lawyers getting fees, in my opinion. So, if you prefer litigation, I used to have a business partner, who loved to sue. That’s part of the reason I’m no longer his business partner, because he always was in a fight, always in a suit and just drumming up legal fees left and right. Cause he liked to fight. I personally would say I can kind of be a bulldog myself and like to fight, but I’m also like, man, I don’t want to fight bad enough to be in the civil litigation system. Cause it’s just a pain like at my firm; I don’t do litigation. If somebody has a lawsuit, you should call this other guy. I can be an advisor on this limited scope, but I’m not doing pleadings. I’m not showing up in court. All that crap. And then you get your general provisions, which I covered in the last episode. So, I’m not going to belabor each and every one of them here, but that’s pretty much it, non-circumvention agreement. Again, the goal is to make sure that, you have something of value, you have some information, when you disclose it you want to make sure that the person can’t go around you, can’t just wait you out. And if they do and they breach that, then you get to you know, kick them in the stomach, so to speak. So, there should be penalties for that if you’re a bad actor. So, till next time have fun. God bless.