Legal Review Should be Done Before Agreeing to a Deal

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A negotiation can be exhilarating or frustrating depending on many factors. When a domain name deal is finally reached, it should mark the end of one stage and begin the contract and escrow discussions. It should not begin the process of a legal review for the buyer.

I don’t know about you, but I have dealt with prospective buyers backing out of a couple of  deals due to their findings from a legal review. The buyers’ attorneys have either found that a trademark would be tough to get for  domain name (and/or brand) or there are existing trademarks would put an application in peril. Whatever the case may be, it is very frustrating to agree to a deal only to later learn that the prospective buyer decided to back out because their legal team has put the kibosh on the deal.

From my perspective, domain name buyers should do a cursory legal review prior to inquiring about domain names. This doesn’t have to be an extensive or exhaustive review, but it should be enough to know whether a domain name will pose legal issues for them for whatever reason. As the negotiation gets more serious and/or the buyer is able determine that there is a strong likelihood of closing a deal, they should have their attorney do whatever  full legal review is necessary to ensure an easy closing should a deal be reached. This should either be done prior to reaching a deal, or they should let the seller know a deal is contingent upon approval from their lawyer.

A legal review on a domain name should be performed before the parties reach a deal. Once a deal has been agreed upon, there shouldn’t be anything that complicates the closing process, besides potential contractual issues that come up.

In my (non-legal expert) opinion, once a deal is agreed to, the buyer and seller are both responsible for following through. If one party decides to back out after an agreement is reached, the other party should be able to hold that party accountable. On a low or mid value deal, holding a buyer accountable may not be financially feasible. I don’t hear about  many sellers trying to enforce a sale on a $15,000 deal when legal fees could take a  large chunk out of the deal. That said, there are other remedies possible, but that is a different topic.

When negotiating to buy a domain name, I think it is the buyer’s responsibility to do a full legal review before agreeing to buy a domain name. If that isn’t possible, the buyer, at the very least, should let the seller know in advance that any deal reached is contingent upon a favorable legal review.

4 COMMENTS

  1. Purchase agreements for real estate are contingent upon many factors–inspection, clear title, well, septic, zoning, financing, subdivision, city approval for in tended use, etc. Commercial PA’s have more contingencies: Phase 1 & 2 environmental surveys, financial review, attorney approval as just a few. Depending on the size of the deal for a domain, I could see few if any contingencies, or multiple layers. As we say in real estate, it’s all negotiable, but said contingencies should be included in the purchase agreement with specific time lines for completion.

  2. An oldie but a goodie book from the 1970s, “Winning Through Intimidation” by Robert Ringer covers these same issues.

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