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Option to Buy and Right of First Refusal

This page introduces the legal concept of an option to buy or an option to purchase. Although an option to purchase may arise in a variety of business settings, this explanation will emphasize its application to a sale of real property, that is, land.

For a period of time, the seller agrees to provide the buyer an opportunity to make an offer to buy the land.

What does it take to create an option to buy? Why would the parties want to use an option to buy? What terms would be included in an option to buy? How does an option to buy relate to the concept of a right of first refusal?

Olson v. Peterson, 288 N.W.2d 294 (N.D. 1980)

Berry-Iverson Co. of North Dakota v. Johnson, 242 N.W.2d 126 (N.D.1976)
'A pre-emption [right of first refusal] differs materially from an option [to buy or purchase]. An option creates in the optionee a power to compel the owner of property to sell it at a stipulated price whether or not he be willing to part with ownership. A pre-emption does not give to the pre-emptioner the power to compel an unwilling owner to sell; it merely requires the owner, unwilling when and if he decides to sell, to offer the property first to the person entitled to the pre-emption, at the stipulated price. Upon receiving such an offer, the pre-emptioner may elect whether he will buy. If he elects not to buy, then the owner of the property may sell to anyone'... citing Volume VI, American Law of Property, § 26.64, p. 507.

Is consideration necessary for both an option to buy and a right of first refusal?

Does the statute of frauds apply to both an option to buy and a right of first refusal?

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