Legal Glossary
Right of First Refusal
A contractual right to match any offer a third party makes before the owner accepts it.
Legal Definition
A right of first refusal (ROFR) is a contractual right giving the holder the opportunity to enter into a transaction on the same terms as those offered by a third party, before the owner is allowed to accept the third-party offer. The holder doesn't set the terms — a third party does — but the ROFR holder has the right to step in and match the deal. If the holder declines or doesn't respond within the specified time, the owner is free to proceed with the third party. ROFR is common in real estate, shareholder agreements, franchise agreements, and content licensing deals.
In Plain English
Right of first refusal is a 'you must come to me first' clause. If you have a ROFR on a piece of real estate and the owner receives an offer, the owner must tell you: 'I got an offer for $800,000 — do you want to match it?' You have a set window (say, 14 days) to decide. If you match it, you get the property. If you pass or don't respond in time, the owner can proceed with the original buyer. It's different from an option to purchase (which lets you buy at a predetermined price) — with ROFR, the price is set by the third-party market, not pre-agreed.
Real-World Example
Priya rents a commercial space and negotiates a right of first refusal clause into her lease. Two years later, her landlord decides to sell the building. An outside investor offers $850,000. Before accepting, the landlord must notify Priya and give her 14 days to purchase the building on the same terms. Priya has the opportunity but decides not to buy. The landlord can now proceed with the investor. If the landlord had sold to the investor without notifying Priya first, she could sue for breach of the ROFR clause.