This Article explores the intricate relationship between brokerage clauses and rights of pre-emption, sets out a framework to determine the pre-emptor’s liability toward the broker, and offers a solution for conflicts of interest between broker, seller, and pre-emptor.
Under German contract law, the exercise of a contractual right of pre-emption establishes a binding contract between the seller and the pre-emptor, based on the terms negotiated between the seller and the original buyer. Over the past fifty years, Germany’s Federal Court of Justice (Bundesgerichtshof) has issued a series of decisions to clarify under what conditions the pre-emptor is liable for third-party brokerage fees established under the contract between the seller and original buyer.
Following the most recent of these decisions, this Article surveys and analyzes the existing jurisprudence to develop a doctrinal framework to determine the pre-emptor’s liability under such brokerage clauses. Against this background, I discuss the legal and economic incentives for the pre-emptor and seller to eliminate the former’s liability to the broker. Based on statutory interpretation, contract theory, and general principles of equity, I argue that a release of liability without the broker’s approval, e.g., through a partial rescission of the pre-emption contract’s brokerage clause would be unconscionable.