Right of First Refusal (ROFR)

Right of First Refusal (ROFR) is a contractual agreement that gives an individual or entity the right to enter into a business transaction with a property owner or seller before the owner can offer the property or Asset to third parties. This right ensures that the holder has the first opportunity to purchase or Lease the Asset under the same terms as those offered by outside buyers.

Examples:

• A tenant in a commercial building may have a ROFR to purchase the property if the owner decides to sell.
• A business partner may have a ROFR on Shares in a company before the Shares can be sold to external investors.

Cases:

• In Gallo v. J.C. Penney Co., the court upheld a ROFR clause, allowing a partner to buy out another partner’s Share before it was offered to outsiders.
• In In re: J. W. Smith Co., a dispute arose over whether the ROFR was properly exercised, leading to a ruling on the necessary notification procedures for valid exercise of the right.