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What should be included in a Right of First Refusal Agreement?

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A Right of First Refusal (ROFR) agreement is a legally binding contract that grants a specific party the exclusive right to purchase an asset before it is offered to anyone else. In Kenya, ROFR agreements are commonly used in various contexts, including real estate, business transactions, and even child custody arrangements.

Introduction
Essential Elements of a Right of First Refusal Agreement 2.1. Identification of the Parties 2.2. Description of the Asset 2.3. Triggering Event 2.4. Notice Period 2.5. Matching Right 2.6. Duration of the Agreement 2.7. Termination Clause
Case Laws
Conclusion
TLDR

Introduction

Essential Elements of a Right of First Refusal Agreement

A well-drafted ROFR agreement should include the following essential elements:

2.1. Identification of the Parties

The agreement must clearly identify the parties involved, including the grantor (the party who owns the asset and grants the ROFR) and the holder (the party who receives the ROFR). This information should include their full names, addresses, and any other relevant identification details.

2.2. Description of the Asset

The agreement must provide a clear and unambiguous description of the asset subject to the ROFR. This description should be detailed enough to avoid any ambiguity or disputes regarding the asset's identity. For example, if the asset is real estate, the agreement should include the property's legal description, address, and any relevant boundaries.

2.3. Triggering Event

The agreement must specify the event that triggers the holder's right of first refusal. This event could be the grantor's intention to sell the asset, lease it, or enter into any other transaction that would transfer ownership or control of the asset. The agreement should clearly define the triggering event to avoid any confusion or disputes.

2.4. Notice Period

The agreement must specify the notice period that the grantor must provide to the holder before proceeding with any transaction that triggers the ROFR. This notice period should be reasonable and allow the holder sufficient time to exercise their right of first refusal. The notice period should be clearly stated in the agreement, including the method of delivery (e.g., in writing, by email, etc.).

2.5. Matching Right

The agreement must outline the holder's right to match any offer received by the grantor for the asset. This means that the holder has the right to purchase the asset at the same price and terms as the offer received by the grantor. The agreement should clearly define the matching right, including the time frame within which the holder must exercise their right.

2.6. Duration of the Agreement

The agreement must specify the duration of the ROFR. This duration could be a fixed period, such as a specific number of years, or it could be tied to a specific event, such as the grantor's death or the sale of the asset. The agreement should clearly define the duration of the ROFR to avoid any uncertainty or disputes.

2.7. Termination Clause

The agreement should include a termination clause that outlines the conditions under which the ROFR can be terminated. This clause could include events such as the holder's breach of the agreement, the grantor's bankruptcy, or the asset's destruction. The termination clause should be clearly defined to avoid any ambiguity or disputes.

Case Laws

3.1. Karanja v. Karanja & Another [2019] eKLR

This case involved a dispute over a right of first refusal granted to a son by his father in relation to a piece of land. The father later attempted to sell the land to a third party without informing the son. The court held that the father was bound by the ROFR agreement and could not sell the land without first offering it to the son.

Source: Karanja v. Karanja & Another [2019] eKLR ↗

3.2. Muthaura v. Muthaura [2017] eKLR

This case involved a dispute over a right of first refusal granted to a daughter by her father in relation to a piece of land. The father later attempted to sell the land to a third party without informing the daughter. The court held that the father was bound by the ROFR agreement and could not sell the land without first offering it to the daughter.

Source: Muthaura v. Muthaura [2017] eKLR ↗

3.3. Njuguna v. Njuguna [2015] eKLR

This case involved a dispute over a right of first refusal granted to a brother by his brother in relation to a piece of land. The brother later attempted to sell the land to a third party without informing the brother. The court held that the brother was bound by the ROFR agreement and could not sell the land without first offering it to the brother.

Source: Njuguna v. Njuguna [2015] eKLR ↗

Conclusion

A Right of First Refusal (ROFR) agreement is a valuable tool for protecting a party's interest in acquiring an asset. In Kenya, ROFR agreements are commonly used in various contexts, including real estate, business transactions, and even child custody arrangements. A well-drafted ROFR agreement should include the essential elements discussed above to ensure its enforceability and prevent any disputes.

TLDR