Right of First Refusal
A right of first refusal gives one party the right, but not the obligation, to enter into a specific business arrangement with another party first before any other third party. Thus the original party has to decline to enter the contract first before the third party can go ahead and close the deal.
It is a common clause used in business partnerships. If one partner wishes to sell his ownership stake, the other partners have the right of first refusal to purchase the shares. If the existing partners decline to purchase them, then the stake can be sold to an outside interested party.
Some domain leasing agreements with purchase options include a right of first refusal clause. This allows the lessee the option to purchase the domain name before it is sold to any other interest parties.
Author: Kris Tabetando
Kris Tabetando provides mergers & acquisitions (M&A) advisory and brokerage services to Internet companies. He also partners with investors to acquire & manage Internet businesses.
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