Right of First Refusal Definition

In property law, a right of first refusal typically allows a buyer to purchase property by matching another offer. It is the right of a party to match the terms of a proposed contract with another party. For instance, if Jones has a right of first refusal to purchase the White house, and White receives an offer of $100,000, then Green will be able to buy the property for $100,000.

Important legal issues are involved in a right of first refusal, such as duty of disclosure. For instance: When the White house is offered for sale, White must tell potential buyers about the right of first refusal. Jones may want to record the right of first refusal with the public records office so all buyers are on notice with regard to Jones' rights.

For example, if a lessee of property holds a right of first refusal, the lessee may elect to exercise it upon being presented with an offeror's contract to buy. The owner's intent to sell is a condition precedent to the exercise of the right of first refusal, which if exercised, the lessee's right of first refusal ripens into an option and the law relating to option contracts applies. The third party's offer doesn't become a legally binding contract as long as the lessee holds a valid right of first refusal, since acceptance of the third party's offer is dependant on the lessee's failing to exercise its right. Once the lessee exercises that right, a contract is created between the lessee and the owner and the third party's offer remains just an offer. If the lessee does not exercise the right of first refusal within the time frame specified under the contract, then the offeror has a contract right to buy.

In divorce law, a right of first refusal means that before either parent can use the services of a baby-sitter or other third-party caregiver, the other parent must be given the opportunity to care for the child during that time. It seeks to maximize the parental time with a child. State laws vary regarding the right of first refusal. In some states, the right of first refusal is considered to be implied in the custody decree, even though it may not be explicitly written out. When the right applies is most commonly in last-minute or non-recurring situations, such as sicknesses or doctor appointments. Whether it applies to preschool, day-care, or before- and after-school care varies by jurisdiction.

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