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Abstract

A persistent problem in right-of-first-refusal jurisprudence has been the effect of an acceptable third-party offer for a package of properties, a portion of which is burdened. In determining the effect of such package deals, courts have primarily relied on principles related to the nature and operation of rights of first refusal. Unfortunately, this approach has led different courts to reach disparate and inconsistent results.The problems posed by the package deal, of course, could be remedied by the parties themselves through a provision addressing the effect of such a transaction on the rightholder's privilege. The provision would answer whether the package deal is to trigger the right of first refusal, and if so, whether the rightholder would be allowed to exercise her privilege on the burdened portion alone or on the entire package. There is, however, every indication that in many circumstances, the costs of agreeing to a provision addressing the somewhat remote possibility of a dispute arising out of a package deal will outweigh its benefits. As a result, parties to right-of-first-refusal agreements will continue to omit a provision addressing the possibility of a package deal. Therefore, a consistent and uniform judicial treatment of the package deal is desirable. The most appropriate solution is for the courts to adopt a default rule that would apply to all instances of the package deal, unless the parties to a right-of-first-refusal agreement contracted around the rule explicitly. In terms of fairness and efficiency, the most appropriate default rule is to require an owner who receives an acceptable offer for a package deal to provide the rightholder with an opportunity to purchase the burdened portion of the package at a reasonable price. If the owner fails to do so, the rightholder should be entitled to enforce her privilege by purchasing the burdened property at a price determined by the court to be fair and reasonable.

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