What is a Right of First Refusal (ROFR) and can it be used nefariously?
In: Economics
Right of first refusal is usually a contract stipulation that says if you are going to sell your stake in something then you need to first offer it to someone that is a party to the contract. If they refuse (hence, ‘first refusal’) then you can sell to someone else.
Say I form an LLC to purchase a nice big house with my sister because otherwise we couldn’t afford it otherwise. In our partnership I would stipulate a right of first refusal between us. So if she wants to sell her stake, she has to first offer it to me and vice versa.
The reason I would want this is I truly want to own the whole thing and in the future I might have that ability, so if the opportunity comes up I want to have first crack at it instead of having to deal with a new partner I don’t know and don’t like.
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