Right Of First Refusal Research Articles

Honour Among Businesspeople: The Duty of Good Faith and Contracts in the Energy Sector

The recognition of a “duty of good faith” was a contentious issue for Canadian courts for many years, despite its recognition in other jurisdictions. In 2014, the Supreme Court of Canada recognized that parties to a contract have a duty to perform all contractual obligations in good faith. This article explores the history behind the “duty of good faith,” the consequences of the Supreme Court’s decision, and the impacts of the decision. This article also examines the effects of the decision as they relate to contracts fashioned in the energy sector, specifically in relation to rights of first refusal (ROFRs), authorizations for expenditure, and accounting and remittance of production sales proceeds.

Restrictions on Disposition in the Oil and Gas Industry: The Extinction of the Species?

Restrictions on disposition in the oil and gas industry, predominantly rights of first refusal, can create significant uncertainties in oil and gas transactions, particularly complex ones. In an effort to discern trends in judicial approaches, the authors review Canadian jurisprudence dealing with difficult rights offirst refusal issues against the backdrop of academic and professional commentary in the 1990s, which promoted the establishment of judicially developed "default rules" to ensure interpretive certainty. The authors postulate that parlies ought not to presume the existence or application of "default rules" in the interpretation and application of restrictions on disposition, based on the jurisprudence. Rather. parties ought to focus on considered drafting when preparing agreements and. where uncertainties arise defaut in the application of provisions, ought to contemplate the reasonable expectations of the parties to the agreement.

Recent Judicial Developments of Interest to Oil and Gas Lawyers

This article is intended to provide a brief review of recent Canadian judicial decisions of interest to oil and gas lawyers. The authors have surveyed Canadian case law in the areas of government regulation, contract, employment, rights of first refusal, royalties,injunctions, freehold leases, and other areas.

When Do State Transmission Siting Laws Violate the Constitution?

Many state transmission line siting laws present constitutional problems under the dormant Commerce Clause, specifically statutes that bar out-of-state applicants from seeking to build multi-state energy infrastructure projects in a state or give automatic rights of first refusal to in-state applicants. Dormant Commerce Clause jurisprudence may require state regulators considering transmission line siting applications to consider benefits beyond their jurisdictional borders—particularly in instances where developers propose infrastructure projects to create regional (as opposed to state-specific) benefits in energy markets or where out-of-state developers propose to build interstate lines.

Italy: the exercise of the employer's statutory right of first refusal on the inventions of the employee

Italy: the exercise of the employer's statutory right of first refusal on the inventions of the employee

Recent Judicial Developments of Interest to Energy Lawyers

This article summarizes a number of recent judgments applicable to the energy sector. Topics touched upon include the interpretation of freehold leases, rights of first refusal, farmout and royalty agreements, applicable limitation periods, recent developments in tort and civil procedure, and aboriginal and competition law.

Share Transfer Restrictions and Family Business: The Minority Shareholder Perspective

Small- and medium-sized enterprises (SMEs), of which most are family-owned businesses (FOBs), play a substantial part in any nation's economy. They are, in many ways, different from large companies with scattered ownership; therefore, further developments accounting for their special circumstances are needed. We study shareholder protection and aim to narrow the gap between theory and practice regarding commercial law in relation to the FOBs. An entrepreneurially friendly environment presupposes that owners can protect their ownership positions against unwanted acquisitions of shares, and not be unwillingly locked-in in a position as minority owners. This requires legal rules that are neither unnecessarily costly, nor time and energy consuming to comply with. Legislators should thus provide a set of rules that facilitates owners to effectively avoid both unwanted acquisitions of shares and locked-in positions. We conclude that default rules, such as a right of first refusal, should be included in the articles of association. We also find it important to allow clauses that enhance the possibility of avoiding locked-in positions, where most national legislations today permit only clauses that contribute to the protection of ownership positions.

The Joint Ownership and the Prediction of the Right of First Refusal in Some Laws and Judicial Practices in Albania

The property relations stand at the basis of the normal development and of the consolidation of the socio-economic report in a democratic society which relies on the market economy. The property can belong to a single person or to two or more people, which is defined as co-ownership of some individuals over one or more possessions as well as legal rights over the possession or shares. The foundation of the co-ownership state is achieved by the will of some people who willingly have agreed about their contribution in the common enterprise, respective parts, the kind of shares, membership fees etc. But, joint ownership can be established without owner / s the willingness. Such a prediction is made by the Albanian legislation in the Civil Code, in the law about “The Return and the Compensation of the Property” as well as in the law “About the Traders and Trade organizations” in which the right of first refusal is provided as a form of issuing the shares due to the increase or expand of the capital. Quite often, there have been problems and lack of clarity related to the implementation of the right of first refusal or about the distinction in the definition of this right by law. These problems have been topics of discussion in our courts of law and will be at the basis of the analysis of this paper. DOI: 10.5901/mjss.2014.v5n20p291

Is the newcomer more aggressive when the incumbent is granted a Right-of-First-Refusal in a procurement auction? Experimental Evidence

In this paper, we run a laboratory experiment to compare two mechanisms in a procurement setting: Right-of-First-Refusal (ROFR) where the incumbent supplier is granted a privileged position versus standard First-Price-Auction (FPA). To this end, we have subjects compete against a computerized agent programmed to behave in a risk-neutral way (i) in a FPA, and (ii) in a ROFR auction where the “incumbent” bidder is the computer. In contrast with theory, we observe that on average bidders are slightly but significantly more aggressive under the ROFR when their costs are such that they are predicted to behave identically under both auction procedures. For the sub-sample of subjects for whom we can estimate a CRRA parameter, we confirm the theoretical prediction that the buyer’s expected cost is larger in the ROFR if the newcomer is not sufficiently risk-averse.

To Re-Tender, or Not to Re-Tender; That is the Question: Potential Litigation by Incumbent Contractors as the New 'First Come, Only Serve' Method of Awarding Public Contracts in India

This short academic paper explores the rapidly changing legal position in India on contract extension to an incumbent contractor in an existing government contract, vis-a-vis the exercise of competing options by public contracting officials in terms of open re-bidding with or without a price preference or a right of first refusal to incumbent contractors.

Right of First Refusal (ROFR) Effects in Auctions with Reserve Price: Empirical Evidence from Taiwanese Government Land Auctions

The right-of-first-refusal (ROFR) granted by the seller to a buyer that allows the favored buyer to purchase the asset at the highest price the seller can obtain from other competing buyers is common in auctions and other economic transactions. Yet the predictions of the theory on the impact of this hybrid mechanism on auction outcomes have not been tested using real-world transaction data. Hence, our knowledge of the practical economic impact of this hybrid auction that decouples price formation and allocation on bidder behavior and ultimately expected seller revenue and profit is quite limited. This paper presents the first empirical evidence on the effects of ROFR from 1012 first-price sealed-bid auctions for the sale of government owned land in Taiwan from 2007 to 2010. The main findings are as follows. An auction with the ROFR has significant negative effect on auction success, i.e. it decreases the likelihood of asset sale. Further, we find that the presence of ROFR in an auction: (i) discourages bidder entry into auction, (ii) creates incentive for bidders to bid less aggressively, and (iii) ultimately reduces seller expected revenue and profit. Interestingly, in majority of the margins of auction outcomes we analyzed the reserve price tends to offset the effects of the ROFR, and the ROFR in turn has significant negative effect on the level of reserve price set by the seller. Overall, the weight of our empirical evidence provides support for the branch of the theory that predicts negative impact of ROFR on auction outcomes.

On Regret Theory, and Framing Anomalies in the Net-Present-Value and the Mean-Variance Models.

Investment Decision Analysis using NPV and or the Mean-Variance Model has become the primary method of investment evaluation. However, these approaches are deeply flawed and are very sensitive to the time horizon, the signs of the periodic cash flows, and discount rates that exceed 100% or are below -100%; and do not account for Real Options, Regret or Rejoice in decision making. This article contributes to the existing literature by: i) explaining behavioral and psychological biases inherent in financing decisions which contradict the NPV-MIRR model, ii) explaining existing and new Framing Effects inherent in the NPV-MIRR model – and critiquing Iturbe-Ormaetxe, Ponti, Tomas & Ubeda (2010); iii) surveying the recent and relevant literature on Regret Theory which explain how Regret Theory can serve as an alternative to the NPV-MIRR model for decision making; iv) explaining how the use of the NPV-IRR model is similar to ultimatum games and Rights-of-First-Refusal (ROFR) and critiquing Grosskopf & Roth (2009); v) explaining the biases and Framing Effects inherent in the Mean-Variance model.

The legal consequences of the breach of pre-emption right

Pre-emption right may be agreed in the contract on sale as one of the collateral clauses. General rules concerning the pre-emption right are included in the Civil Code. These general rules apply in both the pre-emptive right stipulated in the contract between the parties (the contractual right of first refusal), as well as for pre-emptive right arising under the law (statutory right of first refusal). It can also be used in the field of commercial obligations. Generally speaking we can state that the legislation concerning the pre-emption rights is very austere, unsystematically arranged and therefore allowing for too broad interpretation with undefined limits. It means at the same time a considerable legal uncertainty in its application. Participants of the legal relationship may often find only subsequently through the case law in which cases the violation of pre-emption law occurred. The aim of this paper is to analyse individual cases of violation of pre-emptive rights, both pre-emptive right with effects of an obligation and pre-emptive rights with effects of right in rem.

‘Pomp and Unchanged Circumstance’: FERC Attempts to Eliminate Federal Rights of First Refusal

In Order No. 1000, FERC required some electric transmission providers to remove, from their tariffs and agreements, a federal right of first refusal to construct transmission facilities selected in a regional transmission plan for purposes of cost allocation. Given significant exceptions to the ban and compelling legal challenges, FERC's rule may do little to change the competitive landscape.

Arizona Oil and Gas Update

In Murphy Farrell, the court's holding concerned, inter alia, the effect of an acreage discrepancy in an agreement for the sale of certain surface mineral rights (i.e., the right to mine certain decorative boulders for use in landscaping) and determining the applicability of the doctrine of after-acquired title as well as the enforceability of a right of first refusal to purchase a quarry.

Electric regulation: New rate authority for merchant transmission helps renewable energy policy

AbstractA primary objective of the Federal Energy Regulatory Commission (FERC) Order 1000 was the removal of the right of first refusal, a barrier to the entry of merchant transmission developers. Order 1000 also required transmission providers to participate in regional transmission planning processes and for those processes to consider transmission needs driven by public policy established by state or federal legislation or regulation. While the public policy language is general enough in nature to include future policy agenda, the reform is driven by the popularity of renewable portfolio standards.

First-Purchase Rights: Rights of First Refusal and Rights of First Offer

This paper analyzes rights of first refusal and rights of first offer in a multiple-buyer, sequential bargaining setting. A right of first refusal entitles the right-holder to purchase a subject asset on the same terms as those accepted by a third party. A right of first offer requires a seller to first offer the right-holder to buy a subject asset and prohibits the seller from subsequently selling the asset to a third party on better terms than those offered to the right-holder. We examine when and how such rights yield benefits to, or impose costs, on the right-holder and the seller. We show that a right of first refusal transfers value from other buyers to the right-holder, but may also force the seller to make suboptimal offers. A right of first offer induces the seller to lower his first-period offer, which will tend to increase the net surplus to the seller and rightholder, but also forces the seller to make suboptimal subsequent offers. We find conditions under which it is in the ex ante interest of the seller and the right-holder to contract for a right of first refusal or a right of first offer, respectively. (JEL K12, C78)

Texas Shoot-out, avagy biztosítéki konstrukciók a szindikátusi kötelemben

The shareholders agreement is considered a typical contract. This agreement is concluded by and between the members of the company in order to establish the rules of the cooperation among them, their behaviour towards and expectations from each other in connection with the company.
 The agreement is often used in the practice, since its flexible construction enables to rule various types of transaction. For example, in Hungary there is a growing tendency i.e.the major investments and joint venture agreements are being established in the frame of a shareholders’ agreement.
 On the other hand, drafting such a contract is a complex procedure. This type of agreement is not governed by specific law, therefore the general rules of the contract law may be linefore. Furthermore the shareholders’ agreement is located at the borderline between the civil and company law, and in a given case it might be complicated to enforce the provisions of the agreement. For example, if the member breaches the voting provision outlined in the shareholders’ agreement, then the resolution passed upon the contract breach cannot be challenged.
 Due to lack of a specific law, the practice created the adequate legal securities to ensure the enforcement of the cooperation structure outlined in the shareholders’ agreement.
 As the first analysed security, the purpose of the buy-out clauses (Russian Roulette, Texas Shoot-out, Dutch Auction, Put-Option, Call-Option) is to ensure the company’s permanent operation, if there is an insoluble dispute among the members, which obstructs the decision making, and consequently the operation of the company, as well. The concept of the buy-out clause is to settle the dispute in the way of taking over the participation of the involved member by another member.
 The exit clauses (Drag Along, Carry Along) aimed to encumber or to unburden the step out from the company. The entitled person is able to sell the shares of the remaining members to the buyer, or to oblige the seller to sell his own and the entitled person’s participations jointly to the buyer.
 The takeover clauses’ (Control Flip Over, Swiss Clause) duty is to enable the enforcement of the corporate legal obligations outlined in the agreement. If a member fails to fulfil his obligations, the entitled person may acquire his participation, which will enable him to pass the necessary resolution in the members meeting (general meeting). After the voting, the “seller” is entitled to buy back his participation at the same price.
 If the members want to exclude acquiring participation by third persons in the company without their approval, there are adequate securities to be specified in the shareholders’ agreement (for example the right of first refusal, option right).
 By the specific type of shareholders’ agreement the creditor makes investments in the company and becomes member in order to secure the transaction. If the company or the original owners of the company breach the contract, they will be held individually liable till the limit of the investmented amount.
 The shareholders’ agreement is an efficient option to rule major transactions, and with the help of the securities described in this study, the investor could feel his money in safe. On the other hand, there are still a lot of questions to be answered. For example the compliance of these securities with the strict provisions of the law. It is the duty of the practice to reveal the answers.

Notas sobre la naturaleza jurídica de los derechos administrativos de adquisición preferente

El presente trabajo versa sobre la naturaleza jurídica de los derechos administrativos de adquisición preferente, suscribiéndose la tesis dualista que diferencia dos grandes tipos: de un lado, los “tanteos y retractos plenamente administrativos”, sujetos a Derecho Administrativo y fiscalizables por el orden jurisdiccional contencioso-administrativo; de otro lado, los “tanteos y retractos administrativos de naturaleza civil”, sujetos a Derecho Civil y a la competencia del orden jurisdiccional civil, sin perjuicio de la doctrina de los actos separables. Ahora bien, a pesar de su notable disimilitud de régimen jurídico, ambos tipos se adscriben a la institución general civil de los tanteos y retractos legales, no siendo los primeros más que meros derechos legales de adquisición preferente “autotutelados”, y no potestades administrativas de naturaleza ablatoria o modos de expropiar, de modo análogo a lo que sucede con los contratos administrativos. Y ambos se diferencian estructuralmente de los tanteos y retractos inter privatos en que son técnicas de intervención orientadas a la realización de concretos fines de interés general que no se satisfacen por el simple acceso de la Administración a la propiedad de los bienes tanteados o retraídos, de ahí su necesaria configuración causal o finalista que impone el artículo 33.3 CE.

Recent Judicial Developments of Interest to Energy Lawyers

This article provides an overview of recent judicial developments of interest to energy lawyers. The authors summarize and provide commentary on recent Canadian case law in the areas of: Aboriginal law, administrative law, conflict of laws, contracts, environmental law, freehold leases, rights of first refusal, surface rights, unjust enrichment, and taxation.