Agreement First Right Of Refusal

A ROFR differs from a right of first offer (ROFO, also known as the Right of First Negotiation) by requiring the owner to submit to exclusive negotiations in good faith with the rights holder before negotiating with other parties. A ROFR is an option to enter a transaction under precise or approximate conditions. An ROFO is just an agreement to be negotiated. The right of pre-emption (ROFR), also known as the initial right of refusal, is a contractual right to enter into a transaction with a person or company before anyone else can do so. If, by this right, the party refuses to enter into a transaction, the debtor is free to make further offers. This is a popular clause with tenants of real estate, as it favors the real estate in which they are located. However, it can limit what the owner could get from interested parties competing for the property. In the business world, pre-emptive rights are often seen in joint venture situations. Partners in a joint venture generally have the right of pre-emption when buying back the shares of other partners who leave the company. Similarly, in a shareholders` agreement, an ROFO gives non-selling shareholders the right to purchase shares from selling shareholders before being offered to the public. The right of pre-emption encourages a tenant to take better care of a landlord`s property in the hope of a future property. It also offers a valuable trading tool. A tenant may agree to pay higher rent or make other concessions in exchange for the right of pre-emption.

However, the right of pre-emption constitutes a barrier between the seller and an interested third party.