Dealmaking in the Middle East

It is common in the Middle East for a party to enter into a transaction only to find strangers claiming commissions when the transaction is to close. What are the legal ramifications?

Here’s the scenario: Buyer contracts with Seller for a product. Seller doesn’t have the product, and eventually admits this to A, saying the product is difficult to find. Seller promises to source the product. Eventually, the product is found. Buyer is surprised because the contracts now mention a Stranger (“C”), who is from a third country (often Lebanon) who seems to have no relationship to the transaction: the Stranger does not have the product to sell.

What is the legal status of the Stranger? What are A’s obligations to him?

Making introductions and acting as a buyer or seller’s representative constitutes valid consideration for a contract requiring payment for services, whether on a percentage or flat fee basis. In other words, there is nothing wrong with the payment of a commission. The problem is when you throw in names of individuals without specifying their roles in the transaction. Then, without a reference to consideration, a trier of fact could reach the conclusion that the contract was a contract for a gift, which is not a legally binding contract.

This happens when someone decides to add names to a transaction to thank someone for whatever reason where that person has no real involvement in the transaction.

If you have a contract that says,

“Buyer will pay a commission to Seller for brokerage services”

that is completely acceptable. But there clearly is no consideration for anything paid to the Stranger.

There may be a relationship between the Seller and the Stranger. The Stranger may be a subcontractor of the Buyer. But that is not the Buyer’s problem or responsibility. If the Seller promised to pay the Stranger for services, let him pay out of his own pocket.

Given the above scenario, someone could later come in and say, “the Stranger is only the Seller’s friend, there’s no entitlement to a commission, so it cannot be paid.”

This is why for the document to be legally binding the roles need to be spelled out. Identifying a party as “integral to the deal” is a good way to analyze the party’s role. If a person has no role which is “integral to the deal” that person is a bystander looking for a gift. Contract law does not require a buyer to compensate bystanders.