Which transactions trigger a right of first refusal or preferential right to contract
CITATION: Naudé, T. 2006. Which transactions trigger a right of first refusal or preferential right to contract?. South African Law Journal, 123(3):461-496.
The original publication is available at https://journals.co.za/content/journal/ju_salj
This contribution considers the delineation of the transactions that breach or 'trigger' a right of first refusal, thereby giving its holder the right to exercise his right and to enforce the main contract. Examples of questions on which there is either scant, conflicting or unpersuasive South African authority in this area include the effect of an involuntary sale on a right of pre-emption, of non-arm's length transactions between commercially related parties, and of an undertaking by the third party to render some unique performance which the holder cannot match. A comparative study of German and American law leads to proposals for residual rules on these and other contentious issues, including the effect of a 'package deal', that is, where the grantor of a right of pre-emption purports to sell the pre-emption property to a third party as part of a larger package. The article also seeks to encourage drafters of first refusal agreements to consider the appropriateness and cost-effectiveness of initiating negotiations on the areas of uncertainty and of drafting accordingly.