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What Is the Right of First Refusal Agreement

As a professional, I have crafted an article on “What is the Right of First Refusal Agreement” that will help you understand the concept behind it.

A right of first refusal agreement (ROFR) is a clause in a contract that gives a party the option to purchase or acquire a specific property or asset before anyone else can do so. In simpler words, it is a right given to an individual to be offered something before it is offered to the general public. This agreement is typically used in real estate transactions, partnerships, and business sales.

In a real estate transaction, the right of first refusal gives the original owner of a property the option to buy back the property before it is sold to a third party. This means that the owner can match the offer made by the interested buyer and purchase the property themselves. It can also be used when a tenant wants to sublet a property. The landlord may include a ROFR clause in the lease agreement, which would allow the landlord to take the place of a prospective tenant.

Partnerships agreements may also contain a ROFR clause. If a partner wants to sell their share of the business, the remaining partners have the right to purchase that share before it is offered to the general public. This right allows the remaining partners to keep control of the business and prevent outsiders from gaining control.

In business sales, a ROFR clause is included in the agreement when a company is being sold. The clause gives the existing shareholders of the company the right to purchase the ownership stakes of the selling shareholders before they are offered to the general public. This allows the existing shareholders to maintain control of the company and prevent outsiders from taking over.

The right of first refusal agreement is beneficial for both the parties involved. For the seller, it ensures that they will receive a fair price for their property or shares and allows them to have control over who can buy it. For the buyer, it provides them with the option to acquire something that may not be available to the general public.

In conclusion, a right of first refusal agreement is a legally binding clause that gives a party the option to purchase or acquire a specific property or asset before anyone else can do so. It is commonly used in real estate, partnerships, and business sales. This agreement ensures that the seller gets a fair price for their property or shares, while the buyer gets the option to acquire something that may not be available to the general public.

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