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Simple English definitions for legal terms
right of first refusal
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A quick definition of right of first refusal:
Right of first refusal: This is when someone has the first chance to buy something before anyone else. For example, if Beth has the right of first refusal to buy Sam's house and someone else offers to buy it for $300,000, Beth can choose to buy the house for that same price instead of letting the other person buy it. This is different from the right of preemption, which means someone has the right to buy something before it is offered to anyone else.
A more thorough explanation:
A right of first refusal is a contractual agreement that gives a potential buyer the first opportunity to purchase a property or asset before it is offered to others. This means that if the owner of the property or asset receives an offer from a third party, the potential buyer with the right of first refusal has the option to match the terms of the offer and purchase the property or asset instead.
For example, let's say that John has a right of first refusal on a piece of land owned by Jane. If Jane receives an offer from a developer to purchase the land for $500,000, John has the option to match that offer and purchase the land instead of the developer.
Another example could be a company that has a right of first refusal on a patent owned by an inventor. If another company offers to purchase the patent for a certain amount, the original company with the right of first refusal can choose to match that offer and acquire the patent instead.
The purpose of a right of first refusal is to give a potential buyer the opportunity to purchase a property or asset that they have a strong interest in, without having to compete with other buyers in an open market. It can also be a way for the owner of the property or asset to ensure that it is sold to someone they trust or have a good relationship with.