PROTECTION OF THE ENTITLED TO THE RIGHT OF FIRST REFUSAL AGAINST AN APPARENT DECLARATION OF WILL

Abstract

The right of first refusal within the meaning of article 596 of the Civil Code creates an obligation on the part of the obligor to sell a thing to a third party on condition that the party entitled to the right of first refusal has not exercised the said right. The party entitled to the right may confirm the intention to exercise the right by making a declaration of will. Once such a declaration has been made, a contract between the obligor and the entitled party is deemed concluded on the same terms and conditions as provided for in the contract entered into by the obligor and a third party. Both the obligor and a third party may seek to deprive the entitled party of the right, or the possibility of exercising it. They may, for instance, enter into an apparent contract between themselves. The aim of this paper is to establish the legal remedies that are available to the entitled party to protect against such apparent contracts. The specific measures provided in the Civil Code for the protection of the party entitled to a right of first refusal prove inadequate in the event when an apparent contract between the obligor and a third party. A successful claim for compensation under article 599 § 1 of the Civil Code would require a very difficult test for the ‘evidence of apparency’ while the instrument referred to in article 600 § 1 clause 2 of the Civil Code does not apply at all. There are also limitations of the possibility of relying on the presumption of fact principle in establishing the ill-faith of the obligor and a third party, while an unusual conduct of parties (e.g. stipulation of a grossly inadequate consideration) may constitute a premise for the presumption of ill-faith of the parties only if they are unable to provide a reasonable rationale for such conduct.