How to handle Seller's breach of exclusivity in LOI?

April 21, 2025

by a searcher from University of Pennsylvania - The Wharton School in Seattle, WA, USA

I'm in the middle of due diligence (about 30 days into a 60 day exclusive due diligence period) and recently learned the Seller violated the exclusivity clause of our executed LOI by negotiating and accepting another LOI with a different party. Our LOI explicitly states that the Seller shall not market the business nor negotiate any competing offers. Our LOI also states that any offers received must be disclosed. Unfortunately, none of these were observed. How should I handle this situation?

Reply by a professional
from Harvard University in Atlanta, GA, USA

^redacted‌ Not sure you have much recourse. You could technically pursue litigation if that portion of the LOI was binding. You could send them an invoice for your due diligence costs & hours, but I doubt they'll pay it. Situations like this make me laugh when a Sellers/Broker pushes back on exclusivity. Going forward, you may add a statement about "If Seller breaches exclusivity, then Seller will pay all due diligence costs that Buyer has incurred", BUT when I was a Searcher, I never added it because then you set the price of breaking the exclusivity vs. stating it's prohibited and hoping that the Seller honors their promise.

Reply by a professional
from Marquette University in Kirkland, WA, USA

I agree with ^redacted‌, there's not much you can do. Bigger picture - now that he/she has done this could you trust them on anything else if you were to get back in the game? I'd walk, the seller is showing their true nature.

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