Right of First Refusal Clause

A contractual provision that lets a designated party match a bona fide third-party offer before the owner can sell to that third party.

Reviewed by GC AI Solutions Team•Updated August 2026

Definition

A right of first refusal (ROFR) clause gives a designated party the right to match a bona fide third-party offer before the owner can complete a sale to that third party. The owner who receives an offer must present its material terms to the holder, who then chooses to buy on the same terms or step aside. It appears in shareholder and LLC operating agreements, joint ventures, commercial leases, and licensing deals. The holder has the right to buy and may decline to exercise it, and must act within a set matching period.

Lets the holder match a third-party offer and take the deal on the same terms
Triggers when the owner receives a bona fide offer it is willing to accept
Requires the owner to give written notice of the offer's material terms to the holder
Runs a matching period, commonly 20 to 60 days in commercial agreements, for the holder to act or pass
Controls who can acquire shares, membership interests, or assets the parties want to keep close

In shareholder and joint venture agreements, rights of first refusal increasingly sit alongside right-of-first-offer and co-sale terms as a full transfer-restriction package.

What It Does

Outside real estate, the right of first refusal is a control mechanism for who gets to own a piece of your company. In a shareholder agreement or a joint venture, a ROFR keeps a co-owner from selling their stake to an outsider the other owners never approved, by giving them the chance to match the offer first. The mechanics look simple, and the litigation usually turns on two things: what triggers the right, and whether the holder matched in time.

When You'll See It

Beyond real estate, a right of first refusal appears most in shareholder agreements, LLC operating agreements, joint venture agreements, commercial leases, and licensing deals. It is a standard transfer restriction wherever the parties want to control who joins the ownership group. The drafting varies most in the trigger definition and the matching period. See also: change of control, assignment, and exclusivity.

Examples

Emulate Therapeutics, Inc.

Optionee, Stock Option AgreementEquity ROFR · Company repurchase rightOne-Sided2022

"in the event the Optionee ... proposes to sell, exchange, transfer, pledge, or otherwise dispose of any shares acquired upon exercise of the Option ... the Company shall have the right to repurchase the Transfer Shares under the terms and subject to the conditions set forth in this Section 11 (the 'Right of First Refusal')."

Source

Renren Inc.

Participant, Restricted Share Unit AgreementNotice mechanics · Cash price disclosedOne-Sided2023

"Such notice will specify the identity of the proposed transferee, the cash price offered for the Offered Shares by the proposed transferee (or, if the proposed Transfer is one in which the holder will not receive cash, such as an involuntary transfer, gift, donation or pledge, the holder will state that no purchase price is being proposed)."

Source

Terran Orbital Corp.

Participant, Equity Incentive Award AgreementPre-IPO equity · Repurchase on transferOne-Sided2022

"in the event ... the Participant ... proposes to sell, exchange, transfer, pledge, or otherwise dispose of any such Shares ... the Company shall have the right to repurchase the Transfer Shares under the terms and subject to the conditions set forth in this Section (the 'Right of First Refusal')."

Source

Embassy Bancorp, Inc.

Red Bird, Lease AgreementReal-property ROFR · 30-day matchOne-Sided2023

"Embassy shall have a right of first refusal to purchase such property on the terms contained in such written offer. Red Bird shall provide written notice of any such offer to Embassy, whereupon Embassy shall exercise its right of first refusal, if at all, within 30 days of receipt of such notice."

Source

Mullen Automotive Inc.

EVT, Letter of AgreementJoint-venture interest ROFROne-Sided2023

"EVT will not sell any of its ownership interests in MAEO to any third party without first offering Mullen a Right of First Refusal to purchase the said ownership interests."

Source

DynaResource, Inc.

MK Metal Trading Mexico, Offtake AmendmentCommercial offtake (products) ROFROne-Sided2023

"For so long as the Contract remains in place, the Buyer shall receive a right of first refusal to purchase any concentrates or dore or other precious metal bearing products."

Source

Negotiate

If you hold the right:

Holder Side

Define the trigger as a signed term sheet or bona fide written offer, and name every transfer you want covered.
Require complete notice of all material terms: price, structure, conditions, and closing date.
Set a matching period long enough to fund, and require the holder to match all material terms, with a cash-equivalent provision for non-cash offers.
Make the right run with the interest and survive a change of control if you want it to bind successors.

If you grant the right:

Seller Side

Carve out transfers to affiliates, family trusts, and estate-planning vehicles so ordinary transfers do not trigger the right.
Keep the matching period short so a pending sale is not stalled.
Consider a right of first offer instead, which sets a price floor while doing less to chill third-party bids.
Add a clean waiver mechanism so a passed right does not cloud the closing.

Red Flags

“Intent to sell,” which invites disputes over whether the right was activated.
A matching period too short to arrange financing, which can defeat the holder's right in practice.
No definition of “bona fide offer,” which lets a seller structure an affiliate transfer around the clause.
Silence on assignability and change of control, which defaults the right to non-assignable and leaves successor treatment unclear.
A real-property ROFR that is not in writing, which the Statute of Frauds makes unenforceable.

Right of First Refusal Clause FAQs

What is a right of first refusal clause?

A right of first refusal (ROFR) clause gives a designated party the right to match a bona fide third-party offer before the owner can sell to that third party. It appears in shareholder agreements, joint ventures, leases, and licensing deals, and the holder may match the offer or step aside.

What is the difference between a right of first refusal and a right of first offer?

A ROFR is reactive: the owner gets a third-party offer first, then must let the holder match it. A right of first offer (ROFO) is proactive: the owner must offer to the holder before shopping the asset, and may accept a higher outside bid if the holder passes. A ROFR favors the holder; a ROFO favors the seller.

How is a right of first refusal triggered and exercised?

It is triggered when the owner receives a bona fide third-party offer it is willing to accept. The owner gives the holder written notice of the material terms, and the holder has a defined matching period, commonly 20 to 60 days in commercial deals, to buy on those terms or decline. Missing the period usually waives the right for that transaction.

Does a right of first refusal have to be in writing?

For real property, yes. A ROFR on real estate must be written and signed to satisfy the Statute of Frauds. For shares, membership interests, and other personal property, a writing is not always required by statute, though it is essential for enforceability and is treated as mandatory in practice.

Can a right of first refusal be waived or assigned?

Yes. A holder can waive the right in writing, and failing to act within the matching period usually waives it for that transaction only. Assignability defaults to non-assignable unless the agreement says otherwise, and whether the right survives a change of control depends on the drafting.

What happens if an owner ignores a right of first refusal?

The usual remedy is damages for the value the holder lost. Specific performance to unwind a completed sale is rare, because courts hesitate to dispossess a third-party buyer who took title without notice. A buyer who had notice of the ROFR faces a higher risk of rescission.

Related Clauses

This content is for informational purposes only and does not constitute legal advice.