Legal Definitions - finder's-fee contract

A finder's-fee contract is a formal, legally binding agreement where one party agrees to pay another party (known as the "finder") a specific sum of money or a percentage of a transaction's value. This payment, called a "finder's fee," is made in exchange for the finder introducing them to a potential business opportunity, client, partner, or asset. The finder's role is typically limited to making the initial introduction, and the fee is usually contingent upon the successful completion of the business deal that results from that introduction.

Here are some examples to illustrate this concept:

• Imagine a small manufacturing company, "InnovateTech," that is looking to be acquired by a larger corporation. InnovateTech might enter into a finder's-fee contract with a business consultant, "DealLink Advisors." The contract would stipulate that if DealLink Advisors introduces InnovateTech to a buyer, and that introduction ultimately leads to InnovateTech being successfully acquired, DealLink Advisors will receive a pre-agreed percentage of the acquisition price. DealLink's responsibility is solely to make the connection; they are not involved in the complex negotiations or legal due diligence of the sale itself.

  This illustrates a finder's-fee contract because InnovateTech agrees to pay DealLink Advisors specifically for making an introduction that results in a successful business transaction (the acquisition).

• Consider a new software startup, "CodeFlow," that is seeking its first round of venture capital funding. CodeFlow might sign a finder's-fee contract with an individual, "Angel Connect," who has extensive contacts within the investment community. The agreement would state that if Angel Connect introduces CodeFlow to a venture capital firm that subsequently invests a certain amount of money into CodeFlow, Angel Connect will receive a small percentage of the invested capital as a finder's fee. Angel Connect's role is limited to facilitating the initial meeting between CodeFlow and the investor.

  This example demonstrates a finder's-fee contract because CodeFlow is compensating Angel Connect purely for the introduction to an investor, contingent on that introduction leading to a successful funding round.

• A luxury car dealership, "Elite Motors," is trying to locate a very rare, vintage sports car for a high-profile client. Elite Motors might engage a specialized car broker, "Vintage Auto Finders," under a finder's-fee contract. The contract would specify that if Vintage Auto Finders successfully identifies the specific car and connects Elite Motors with its owner, leading to Elite Motors purchasing the vehicle, Vintage Auto Finders will receive a flat fee or a percentage of the car's purchase price. Vintage Auto Finders' job ends once the introduction is made and the car's availability is confirmed.

  Here, the contract is a finder's-fee agreement because Elite Motors is paying Vintage Auto Finders solely for the service of locating and introducing them to the owner of a specific, desired asset, which then leads to a purchase.