Know The Difference Between "Right of First Refusal" and "Right of First Offer"

The Washington Court of Appeals, Division Three, just released an opinion in Alan Kelly, et al v. Ammex Tax & Duty Free Shops West, Inc. explaining the difference between a "right of first refusal" and a "right of first offer". What's the big difference, they're pretty much the same right? No.

As the court explains: "A right of first offer gives the grantee of that right the right to buy property before it is offered for sale to third parties. A right of first offer is different than a right of first refusal. A right of first refusal gives the grantee the right to meet an offer made by a third party, before the landowner is free to sell the property to that third party." (Emphasis Added).

This became a significant issue in the case because the grantee, Ammex, had a right of first offer. However, the grantor, Norman Jensen, essentially considered this right to be a right of first refusal. As such, Jensen put the property for sale - without first offering the right to Ammex. Jensen then obtained a buyer who offered to purchase the property for $420,000.00. After obtaining the offer, Jensen offered the property to Ammex for $430,000.00. Ammex later made the claim that the right of first offer gave them the right to purchase before Jensen put the property on the market.

The trial court disagreed with Ammex's position and dismissed the claims. However, on appeal Division Three explained the difference between the "right of first offer" and "right of first refusal" and reversed the trial court. Division Three went on to state that Ammex's right of first offer was a preemptive right and as such they should have been given the opportunity to make the first offer on the property before it went on the market.

Clearly the two provisions can be seemingly close in hand, but the difference is rather big given the order in time in which the right vests. Get to know the difference.