When you enter into a commercial contract, it is important to consider both your current needs and future opportunities. A right of first refusal, sometimes known as a contractual right of pre-emption, is a clause that requires one party to offer specified contract terms to another party before entering a contract with a third party on those same material terms. <\/p>\n\n\n\n
Businesses can use this type of clause as a strategy to preserve business relationships and protect access to valuable opportunities. This article explains how a right of first refusal clause works and provides suggestions for drafting it effectively in your commercial contracts.<\/p>\n\n\n\n
Before considering this specific type of clause, you should understand why strong commercial contracts<\/a> are important for your business. Commercial contracts can create important, clear and enforceable rules when they are well-drafted and entered into correctly. <\/p>\n\n\n\n They can be useful to set out your rights and obligations, and thereby prevent a mismatched understanding, which could lead to disputes. They can also help you manage risk in various ways, by recording key commercial terms to help projects progress smoothly and limit your liability if things go wrong. <\/p>\n\n\n\n The right of first refusal is an example of a way in which a contract can be used to help document and protect your commercial objectives.<\/p>\n<\/div>\n\n\n\n A right of first refusal gives a party (the grantee) the first opportunity to enter into a contract on specific terms before the grantor may\u00a0conclude a contract\u00a0with a third party on those same terms.<\/p>\n\n\n\n In other words, if the grantor wants to enter into a particular agreement with someone else, it must first give the grantee the opportunity to accept those terms. <\/p>\n\n\n\n Generally, the grantor can only proceed with a third party if the grantee: <\/p>\n\n\n\n However, the grantor will typically be restricted from concluding a contract with the third party on terms that are more favourable than what they offered the grantee. <\/p>\n\n\n\n\n\n Continue reading this article below the form\n <\/i>\n<\/a>\nWhat Is a Right of First Refusal?<\/h2>\n\n\n\n
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