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Right of First Refusal

Stuart v. Stammen, 1999 ND 38, 590 N.W.2d 224

Greg Stuart appealed from a judgment dismissing his action for specific performance of a contract right of first refusal to purchase real estate owned by Larry and Mary Stammen. We reverse ... Stuart neither waived nor failed to timely exercise his contractual right of first refusal.


On May 18, 1997, Greg Stuart entered a written agreement to purchase Larry and Mary Stammen's rural farmstead ... for $71,000, with a closing date of June 2, 1997. The Stammens attempted to purchase a new home in Grand Forks, but were unable to obtain financing ... Consequently, Stuart and the Stammens executed a Cancellation of Purchase Agreement on May 28, 1997, canceling Stuart's purchase agreement. The cancellation contract gave Stuart a right of first refusal to purchase the Stammens' real property, if, within six months, they decided to sell it.

On May 31, 1997, Larry Stammen met with Stuart at a lounge in Mayville. He told Stuart a third party, John Clayburgh, was interested in purchasing the farmstead, and some personal property, for a price of $140,000. Stuart said he was not willing to pay that much for the property and if Stammen could get that price he should "go for it."

On June 6, 1997, Stammen sold the property to Clayburgh for $117,500. The purchase contract designated a price of $75,000 for the real estate and $42,500 for the personal property. Stuart learned about the sale from a friend, and he talked to Larry Stammen about it on June 14, 1997. During their conversation, Stammen offered to sell Stuart the real and personal property together for the $117,500 price Clayburgh had offered to pay for it. Stuart refused that offer, stating he was not interested in the personal property. Stuart then sued the Stammens for specific performance of his contractual right of first refusal, offering to pay $75,000 for the real property.


Stuart had a contractual right to purchase the Stammens' real property if they decided to sell within six months. There was no requirement or obligation by Stuart under the right of first refusal to purchase the Stammens' personal property. Stuart testified Larry Stammen told him during negotiations he could probably sell the personal property separately by auction or other means. Stuart also testified he was certain the Stammens' personal property did not have a value in excess of $20,000 and, therefore, even if Clayburgh's offer of $140,000 included both real and personal property, the amount Clayburgh was willing to pay for the real property was well in excess of the $71,000 Stuart had originally agreed to pay for it. In view of that substantially higher price being offered by Clayburgh, Stuart was not interested in purchasing the property, and he told Stammen if Clayburgh would pay that much he should sell the property to him.

... the Stammens ultimately sold the property to Clayburgh for only $117,500, designating $75,000 toward the real property and $42,500 for the personal property.

To be effective, a waiver must be a voluntary and intentional relinquishment of a known existing advantage, right, privilege, claim, or benefit ... In a commercial context, this Court has generally required a high degree of specificity for upholding waivers ...

Stuart's option involves the right to purchase real property, and is sufficiently important its waiver must be specific, clear, and unambiguous. Under the circumstances, there is no specific, clear, and unambiguous evidence to support a finding Stuart voluntarily and intentionally relinquished his right to purchase the Stammen property at any price. Neither Stuart's conduct nor his words constituted a specific, clear, and unambiguous waiver of the purchase option. Stuart concedes he told Stammen he was not interested in exercising his right to purchase the property at a price of $140,000. He told Stammen to sell the property to Clayburgh if he could get $140,000 for it. But, Stuart's refusal to exercise the option at a price of $140,000 cannot reasonably be interpreted to constitute a waiver of his right to purchase the property if the Stammens decided to sell it for less.

Clayburgh paid only $75,000 for the Stammens' real property ...

Stuart and Stammen discussed the Clayburgh purchase on June 14, 1997. During that discussion, Stammen only offered Stuart the opportunity to buy both the real and personal property as a package deal for $117,500. Stuart reiterated he was interested only in the real property, on which he had a right of first refusal and for which he was willing to pay $75,000, but not $117,500.

When a party has a right of first refusal on specified property, the seller cannot add additional property and make it part of the package, thereby forcing the option holder to purchase the additional property to exercise the option ... (the holder of a right of first refusal cannot be compelled to purchase more property than is subject to the right of first refusal or else forfeit the first refusal right) ...


The trial court found, in the alternative, Stuart failed to timely exercise the right of first refusal. Under the terms of the first refusal, the Stammens, upon receiving "a suitable offer" were required to "contact Greg Stuart and Mr. Stuart shall have seven (7) days within which to sign a contract to purchase the real estate described in the attached Purchase Agreement on the same terms and conditions of the new offer made to the Stammens." The Stammens never approached Stuart with an offer to sell the real estate to him for the $75,000 purchase price Clayburgh was willing to pay for it. Under the clear terms of the agreement, the seven days within which Stuart had to exercise his right of first refusal did not commence until the Stammens contacted Stuart with the offer. Consequently, the seven-day period for Stuart to exercise the option was never triggered. The trial court's finding Stuart failed to timely exercise the option was, therefore, clearly erroneous.


When an owner has breached an option holder's right of first refusal to purchase property, specific performance is an available remedy to compel the conveyance of the premises to the option holder ... The contract between the Stammens and Clayburgh set a purchase price for the real estate of $75,000. Under the right of first refusal contract, Stuart was entitled to purchase the property at that price. Accordingly, we reverse the judgment and remand for entry of judgment giving Stuart seven days to exercise his right to purchase the Stammen property for $75,000.

Last updated June 30, 2005

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