Real Estate Option Contracts, First Right of Refusal

In certain circumstances, particularly in transactions involving real estate developers, a contracting party will attempt to create an option contract over a parcel of land. To be enforceable and valid, an option requires the same types of things a typical contract requires.

“An option consists of a continuing and irrevocable offer which the optionor cannot withdraw during a stated period.” Lake Cable, Inc. v. Trittler, 914 S.W.2d 431, 434 (Mo. Ct. App. 1996). “The purpose of an option contract for land is to bind the landowner for a valuable consideration not to withdraw a specified offer for the sale thereof during a fixed period, so that he is bound to convey his land to another upon condition that such other shall, within a specified time, accept his offer and comply with the terms proposed.” Ryder v. Wescoat, 535 S.W.2d 269, 271 (Mo. Ct. App. 1976) [emphasis added]. “A valid option to purchase land requires independent consideration separate and apart from the purchase price to be paid for the land.” HGS Homes, Inc. v. Kelly Residential Group Inc., 948 S.W.2d 251, 255 (Mo. Ct. App. 1997).

In contrast to an option, there is also the distinct but related concept of first right of refusal. “A first right of refusal, or preemptive right, requires the seller, when or if he or she decides to sell, to first offer the property tot he holder of the right, either at a stipulated price or at the price and on the terms the seller is willing to sell.” Barling v. Horn, 296 S.W.2d 94, 98 (Mo. 1956).


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