Is a right of first refusal in Texas legal?
Full Question:
Answer:
A right of first refusal may take place in a multiple-buyer, sequential bargaining
setting. The holder of a right of first refusal has the option to purchase a subject asset on the same terms as those accepted by a third-party buyer. A variant of a right of first refusal is a right of first offer. A right of first offer requires a seller who wishes to sell a subject asset to offer the right-holder to buy that asset before it is offered to other potential buyers. If the right-holder declined the seller’s offer, the seller may sell the asset to a third party but only on terms no better (for thethird party) than those offered to the right-holder.
A seller encumbered with a right of first offer is subject to two constraints. First, a right of first offer requires that offers made subsequent to the first offer may not be lower than the first offer. Second, all offers may not be higher than the value of potential buyers’ investigation constraint.