Are First Right of Refusal clauses enforceable?

[dncr]

What is the name of your state (only U.S. law)? California

I purchased a horse last year for a dollar. The sale contract had a first right of refusal clause stating that if I ever decide to sell him, I would offer him back to the old owner for $1. I have a bill of sale and his registration papers are in my name.

Of course, I never intended to sell him but I have fallen on hard financial times and have to do what's best for him and my family, and that means sell the horse. Additionally, I owe back board and vet bills, and I need the sale price of the horse to cover these bills. Technically, the boarding stable owner has a lien on him until the bill is paid, anyway, so he can't go anywhere unless that happens.

Anyway, the old owner wants to exercise her first right of refusal and take him back, but with the bills I owe, I can't sell him back to her for $1 (I have other reasons for not wanting to, but I'm trying to keep this to legalities). She does not have the money to pay off the bill, and I doubt anyone will loan it to her, so the whole thing is likely moot, but I want to cover my bases.

How enforceable is this first right of refusal clause in the contract? I've been told they are not enforceable.

 

[HomeGuru]

What is the name of your state (only U.S. law)? California

I purchased a horse last year for a dollar. The sale contract had a first right of refusal clause stating that if I ever decide to sell him, I would offer him back to the old owner for $1. I have a bill of sale and his registration papers are in my name.

Of course, I never intended to sell him but I have fallen on hard financial times and have to do what's best for him and my family, and that means sell the horse. Additionally, I owe back board and vet bills, and I need the sale price of the horse to cover these bills. Technically, the boarding stable owner has a lien on him until the bill is paid, anyway, so he can't go anywhere unless that happens.

Anyway, the old owner wants to exercise her first right of refusal and take him back, but with the bills I owe, I can't sell him back to her for $1 (I have other reasons for not wanting to, but I'm trying to keep this to legalities). She does not have the money to pay off the bill, and I doubt anyone will loan it to her, so the whole thing is likely moot, but I want to cover my bases.

How enforceable is this first right of refusal clause in the contract? I've been told they are not enforceable.

**A: why would you think that such a clause is not enforceable?

 

[dncr]

That's what I've been told. Which is why I said "I've been told." However, I didn't know if it's true or not, so I came here. To find out for sure.

 

[asiny]

That's what I've been told. Which is why I said "I've been told." However, I didn't know if it's true or not, so I came here. To find out for sure.

And now you are sure. Sell the horse back for $1.

 

[dncr]

And now you are sure. Sell the horse back for $1.

I can't. As I said in my post, there is a lien on him and he can't go anywhere until the board bill is paid.

 

[dncr]

By the way, there is a reason I don't want the horse to go back to her. She does not have the money to care for him properly--she has less money than I do. When I got him, he had not had certain important maintenance care done in way too long. Her family had been urging her to get rid of him for a year before she finally did. I've been in contact with her daughter, who is backing me up. It is best for the horse AND the old owner, as well as for me, if I sell him to someone who can afford him. In addition to the lien for the bills owed, that is a major factor in my not wanting to honor this clause. I know that has nothing to do with legalities, but I don't want you to think I'm just being selfish.

 

[asiny]

By the way, there is a reason I don't want the horse to go back to her. She does not have the money to care for him properly--she has less money than I do. When I got him, he had not had certain important maintenance care done in way too long. Her family had been urging her to get rid of him for a year before she finally did. I've been in contact with her daughter, who is backing me up. It is best for the horse AND the old owner, as well as for me, if I sell him to someone who can afford him. In addition to the lien for the bills owed, that is a major factor in my not wanting to honor this clause. I know that has nothing to do with legalities, but I don't want you to think I'm just being selfish.

Understandable- but you still signed a contract agreeing that the previous owner could purchase the horse for $1 if you were to sell. If you knew this when you were purchasing the horse, why would you agree to the contract?

Sadly you really have no avenue when, and if, you decide to sell the horse but sell to her for $1.

Perhaps another user could help on this, if the stable has a lien on the horse- all that means is that if you sell the horse then the proceeds of the sale goto them towards their unpaid invoices. The fact that you are faced in selling the horse- because you can no longer afford to keep it- does not mean they can dictate the price of the horse when you have a legal contract that the original owner can purchase for $1. Their lien does not supercede an already, binding, contract- does it?
Also, just wondering, are they continuing to charge you for stabling the horse during this time too? If so, it does not seem right they can hold your horse in lieu of back-payment... but still charge you stabling because THEY refuse to release the horse to you.

 

[dncr]

It's a common practice...I forget the name of the code, but they can, indeed, continue charging board for the time the horse is there until the balance is paid off, so it continues to build up. What usually happens is the stable owner takes possession of the horse and then legally owns it (usually after six months or so of unpaid board but it varies), so they sell it to pay off the bill and the owner is just out the money and walks away.

I could just choose not to sell the horse at all in order to not let him go back to the old owner, and then the stable owner could just seize him and it would be out of my hands. Even if I sold him back to his old owner, which I guess technically I could, she wouldn't be able to move him without paying off the bill....and since she has no money, the stable owner would eventually seize him and sell him. If I sell him, I have some say in who takes him and can make sure he goes to a good home. If the stable owner sells him, I have no say. He could even go to a meat packer. Certainly not in anyone's best interest.

So, let's say I just tell the old owner she can't have him, and I go ahead and sell the horse to someone else. What could she do about it? I'm thinking she would have to hire a lawyer to sue me, which would cost her money she doesn't have. Then what?

And the reason I agreed to the clause was because I wanted the horse and didn't plan on selling him. If I had my way, I would have him for the rest of his life. It breaks my heart to have to sell him, but I have run out of options. I want him to be taken care of, and he is a very special horse that should be shown and bred, not stuck in a dirt paddock getting no exercise. I'm very emotional about this and I want to do right by the horse.

 

[asiny]

I could just choose not to sell the horse at all in order to not let him go back to the old owner, and then the stable owner could just seize him and it would be out of my hands. Even if I sold him back to his old owner, which I guess technically I could, she wouldn't be able to move him without paying off the bill....and since she has no money, the stable owner would eventually seize him and sell him. If I sell him, I have some say in who takes him and can make sure he goes to a good home. If the stable owner sells him, I have no say. He could even go to a meat packer. Certainly not in anyone's best interest.

Best case is to let them seize the horse and taking ownership, stopping you from accruing further board charges and they can then sell the horse to cover some of your bills.

So, let's say I just tell the old owner she can't have him, and I go ahead and sell the horse to someone else. What could she do about it? I'm thinking she would have to hire a lawyer to sue me, which would cost her money she doesn't have. Then what?

Just because the old owner does not have the money to keep the horse, don't make the mistake in believing she won't have the money to sue... which after she would win, and she will, you would also be liable to pay back ALL her attorney costs too.. meaning she would not have spent a penny to sue you AND she may well be awarded money (above and beyond the $1) too... which you would also have to pay her.
I just had an after thought too- if you sell the horse to someone else and the old owner sues, because you never had the right to sell the horse to someone else, the court could order the horse be returned to the original owner, with you ALSO having to pay back the new buyer.

And the reason I agreed to the clause was because I wanted the horse and didn't plan on selling him. If I had my way, I would have him for the rest of his life. It breaks my heart to have to sell him, but I have run out of options. I want him to be taken care of, and he is a very special horse that should be shown and bred, not stuck in a dirt paddock getting no exercise. I'm very emotional about this and I want to do right by the horse.

The right thing by the horse, puts you in a bad legal situation.. which you will not walk away from happy in any scenario.

You came to this site with a question;

How enforceable is this first right of refusal clause in the contract?

It seems as though, regardless of being told the contract is enforceable, you are now looking for a way out of the contract.... you don't have one. Your legal advice in this forum, is that you cannot get out of the contract and sell the horse to anyone, but her.

 

[dncr]

Thank you for the replies.

 

[sandyclaus]

As I see it, if you were not agreeable to the "First Right of Refusal" clause in your sale contract, then you should not have signed the contract or renegotiated the contract to exclude it. The fact that you are having second thoughts now about having agreed to it is NOT a defense to the clause in the contract. You agreed to it, and if you decide to sell, you have no choice but to honor that clause or face the legal consequences of not having done so.

It also doesn't matter if you don't feel that the original owner is in a position now to take the horse back. That owner could very well be planning on exercising their First Right of Refusal, pay their $1 price as specified in the contract, and then turning around and selling the horse again for whatever price they can get for it. You may not like it, but that is their right. If that is their plan, there is nothing you can do about it, and you cannot refuse to honor the clause just because you don't like that plan.

 

[Mass_Shyster]

I can't. As I said in my post, there is a lien on him and he can't go anywhere until the board bill is paid.

I don't see how the lien would prevent the sale. Simply call the former owner and tell her that you are selling the horse, and she can come pay the $1 and pick up her horse, but she has to pay off the lien to take possession.

Another alternative is to breach your agreement and sell the horse to someone else for $1, and have that person pay to clear the lien. The former owner can sue you, but she will have a pretty difficult time getting a judgment for more that $1, the declared value of the horse.

 

[OHRoadwarrior]

Regardless of what we tell you our obligation is. you want to sell the horse for your own financial gain, because you have dug yourself into a hole. You need to sell her back the horse for $1 and pay your board bill. If she cannot support the horse, she is free to sell it. You are not going to do anything else that is not morally theft, from the lady.

 

[tranquility]

The OP must sell the horse per the contract or he will be in breach. If breach, the benefit of the bargain is the FMV of the horse. If sold for a dollar, the lien is problematical and would require the OP to pay it off. Even then, the question of the position of a statutory lien when alienation is already limited, would require some research for me to give any kind of answer.

But, the bottom line is, the OP is going to either pay the lien off or get sued by someone. Who and what amount the suit is for depends on the lien law on the matter and the choices the OP makes. But, sell for a dollar or a thousand, it's not really going to make much of a long term difference. (Assuming the one out the money sues the OP.)

 

[Zigner]

Speaking to attorneys fees that were mentioned above...

Unless this is a super-horse, this will be a small claims matter. No attorneys. And, furthermore, if attorneys fees are not addressed in the contract, then they won't be recoverable anyway.