What Does “Right of First Refusal” Mean in a Contract?
The right to match any offer a third party makes before the owner can sell to that third party.
Detailed Explanation
ROFR gives you the opportunity to buy before anyone else can. If the owner receives an offer they want to accept, they must first offer you the same terms. You can buy at that price or let the deal proceed.
ROFR is common in shareholder agreements (buy shares before outsiders), real estate (tenant's right to buy), and commercial relationships (right to handle new services before competitors).
Example in a Contract
“Before selling any shares to a third party, Shareholder must first offer such shares to the Company and other shareholders on the same terms. If not purchased within 30 days, Shareholder may complete the third-party sale at no less favorable terms.”
Why It Matters
ROFR protects your position—you won't be surprised by new partners or owners you didn't choose. But it can also slow transactions and discourage third-party interest (why make an offer that just sets a price for insiders?).
Related Terms
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