Real estate contracts - Options and rights of first refusal

Learning Outcomes

This article explains option contracts and rights of first refusal in real estate, including:

• How each right is created, what legal interests they confer, and how to distinguish them from ordinary purchase agreements and mere offers on MBE fact patterns.
• Formation requirements—consideration, the Statute of Frauds, definiteness of terms, and common drafting language—plus how courts treat recited but unpaid consideration.
• The mechanics of valid exercise: strict-compliance rules for options, what it means to “match” a third‑party offer for a ROFR, and why the mailbox rule usually does not apply.
• How duration, assignability, and recordation affect priority against subsequent purchasers, including the role of bona fide purchasers without notice.
• Application of the Rule Against Perpetuities and the doctrine of unreasonable restraints on alienation to options and ROFRs, with emphasis on perpetual and fixed‑price rights.
• Typical exam-tested scenarios involving lease‑embedded options, package deals, internal transfers, and non‑sale transactions that may or may not trigger a ROFR.
• Available remedies—especially specific performance, injunctions, and damages—when an option or ROFR is breached, and how notice to third parties shapes the relief a court will grant.

MBE Syllabus

For the MBE, you are required to understand real estate contract provisions that create future purchase rights, with a focus on the following syllabus points:

• Define and distinguish option contracts and rights of first refusal (ROFRs).
• Identify formation requirements, including the Statute of Frauds and consideration for options.
• Analyze strict requirements for valid exercise of options (timing, manner, notice).
• Determine when a ROFR is triggered and what it means to “match” a third-party offer.
• Apply the Rule Against Perpetuities and restraints on alienation doctrines to options and ROFRs.
• Evaluate assignability, duration, and termination of these rights.
• Identify and analyze remedies (especially specific performance and damages) for breach of an option or ROFR.

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

1. An option contract for the sale of land requires which of the following to be irrevocable for the stated period?
   1. A writing signed by the optionor only.
   2. Consideration from the optionee.
   3. A statement that the offer is firm.
   4. Recordation in the county land records.
2. A landowner grants a neighbor a right of first refusal (ROFR) to purchase the landowner's property for $300,000 if the landowner ever decides to sell. Later, the landowner receives a bona fide offer from a third party to purchase the property for $320,000. What must the landowner typically do?
   1. Sell immediately to the third party.
   2. Offer the property to the neighbor for $300,000.
   3. Offer the property to the neighbor for $320,000.
   4. The ROFR is void because no consideration was paid.
3. Which interest is generally subject to the common law Rule Against Perpetuities?
   1. An option to purchase held by a current tenant within the lease term.
   2. A possibility of reverter.
   3. A right of first refusal granted to a specific, living individual.
   4. A right of first refusal granted "to the grantee, its heirs and assigns."

Introduction

Beyond standard purchase agreements, real estate contracts often include provisions that create future purchase rights in favor of one party. Two such provisions are especially important on the MBE:

• Option contracts, and
• Rights of first refusal (ROFRs) (also called preemptive rights).

Both create opportunities for a holder to acquire property in the future, but they work quite differently.

• An option gives the holder the power to compel a sale on agreed terms by timely exercise, whether or not the owner wishes to sell.
• A ROFR does not allow the holder to force a sale. It merely gives the holder a chance to buy if the owner chooses to sell on specified terms (usually the terms of a third-party offer).

Understanding their structure, formation (consideration, writing, and recordation), how and when they are exercised, and how they interact with the Rule Against Perpetuities and restraints on alienation is a frequent source of MBE questions.

Key Term: Option Contract
An agreement in which an owner (the optionor) grants another party (the optionee) the right, but not the obligation, to purchase property at a fixed price on stated terms within a specified time. It is a separate, binding contract that makes the original offer irrevocable during the option period, usually because the optionee pays separate consideration (the option price or option premium).

Key Term: Right of First Refusal (ROFR)
A contractual preemptive right that requires the owner, if the owner decides to sell, to offer the property first to the ROFR holder on specified terms—typically the same terms as a bona fide third-party offer—before selling to that third party.

Key Term: Optionor
The party who owns the property and grants an option to purchase (or a related purchase right) to another.

Key Term: Optionee
The party who receives and holds the option right to purchase the property from the optionor.

Key Term: Option Price (Option Premium)
The separate consideration paid by the optionee to obtain the option itself. It is distinct from the eventual purchase price for the property, and it is usually nonrefundable if the option is not exercised.

Key Term: Rule Against Perpetuities (RAP)
A common law rule that invalidates certain future interests if there is any possibility that they might vest (or fail to vest) more than 21 years after the death of a relevant life in being at the time the interest is created.

Key Term: Unreasonable Restraint on Alienation
A restriction on the owner’s ability to transfer property that is so extensive in duration, price limits, or conditions that it is considered invalid as a matter of public policy because it excessively interferes with marketability of land.

Key Term: Specific Performance
An equitable remedy under which a court orders a breaching party to perform its contractual promise—here, typically to convey the property—rather than merely pay money damages.

Key Term: Equitable Conversion
A doctrine under which, once a land sale contract is specifically enforceable (for example, after a validly exercised option), equity treats the buyer as the owner of the real property and the seller as owner of the purchase money.

Key Term: Bona Fide Purchaser (BFP)
A person who acquires property for value without notice (actual or constructive) of another’s prior claim or interest. Under recording acts and equitable principles, a BFP is often protected against prior unrecorded interests.

The rest of this article analyzes options and ROFRs separately, then compares them and discusses remedies.

Option Contracts

An option contract creates a present contract right in the optionee and an associated power of acceptance of the original offer. The land sale contract is not yet in place; rather, the optionee has a binding right to create the sale contract by timely, proper exercise.

Nature of the Interest

Until the option is exercised:

• The option creates a contractual right in the optionee, not an immediate property interest in the land.
• However, the option right itself is often treated as an interest affecting title. A purchaser with notice takes subject to it, particularly if the option is recorded.
• Once the option is properly exercised, the parties have a binding land sale contract, and equitable conversion generally applies.

Formation Requirements

At common law (and on the MBE), an option related to real property must satisfy both contract and property rules.

1. Statute of Frauds (SOF)
   Because it is a contract “for the sale of an interest in land,” an option must be in writing and signed by the party to be charged (the optionor).

   The writing should include:

   • Identification of the parties,
   • A description of the property,
   • The option price (if any),
   • The purchase price or a workable price formula,
   • The duration of the option (option period), and
   • Any conditions for exercise.

   Part performance doctrines are rarely applied to options on the bar exam; assume the SOF applies and a writing is required.

2. Separate Consideration (Option Price)
   The key feature of an option is that the offer to sell is irrevocable during the option period. At common law, an offer is normally revocable until accepted, even if it states that it will be held open. For offers relating to land, there is no UCC “firm offer” rule. Therefore:

   • To make the offer irrevocable, the optionor’s promise to keep the offer open must be supported by consideration from the optionee.
   • This consideration is the option price or option premium (e.g., “$100 in exchange for an exclusive 60-day right to buy Blackacre for $200,000”).

   Features of the option price:

   • It is separate from the purchase price for the land.
   • It may be nominal ($1, $10) and still valid, as long as it is actually bargained for and given, not a sham.
   • It is usually nonrefundable if the option is not exercised.

   If there is no consideration, the promise to keep the offer open is not binding and is generally revocable at any time before acceptance, even if a time period is stated.

   • Some courts treat a signed, written option reciting consideration as binding even if the consideration was not actually paid. On the MBE, if the facts say consideration was paid or recited, treat the option as irrevocable.

3. Distinguish from UCC Firm Offers
   Do not confuse real estate options with UCC § 2‑205 firm offers:

   • Firm offers apply only to sales of goods by merchants.
   • They require a signed writing but do not require consideration for up to three months.
   • They do not apply to real estate; real estate options require consideration.

Recordation and Priority

Option rights can be recorded like other interests in land.

• Recordation is not required for validity between the parties, but it matters against third parties.
• A BFP without notice who records first may take free of an unrecorded option under a notice or race‑notice statute.
• If the option is recorded, later purchasers with notice (actual or record) take subject to the option.

Assignability of Options

Unless the contract provides otherwise or the option is clearly personal (e.g., tied to special personal services), options are generally assignable by the optionee.

• An assignee steps into the shoes of the optionee and can exercise the option on the same terms.
• A clause expressly prohibiting assignment is typically enforced on the MBE.

Duration and Termination

The option contract will specify an option period (e.g., “60 days from the date of this agreement”).

• Time is usually of the essence, even if not explicitly stated, because the option is a bargained-for right for a fixed period.
• If the optionee fails to exercise within the period, the option expires automatically; there is no right to late exercise unless the optionor expressly waives strict compliance.
• The optionor’s death does not terminate a valid option; the right is enforceable against the optionor’s estate.

Exercise of Option Contracts

To exercise the option, the optionee must accept the original offer in the way the option contract specifies, before expiration.

Key points:

• Strict compliance is the rule. The optionee must:
  • Exercise within the stated time, and
  • Use the required method (e.g., written notice, delivery to a particular address, sometimes accompanied by earnest money).
• The mailbox rule generally does not apply to option acceptances. Acceptance is effective on receipt by the optionor (or designated agent), not on dispatch, unless the contract clearly says otherwise.
• Attempting to change material terms is not a valid exercise; it is a counteroffer, which usually terminates the option.

Once the option is validly exercised:

• A binding land sale contract arises on the stated terms.
• Equitable conversion applies: the optionee becomes equitable owner of the land; the optionor has a claim to the purchase money.

Rule Against Perpetuities and Options

Key Term: Restraint on Alienation
Any provision that, in form or effect, restricts an owner’s ability to transfer property—by outright prohibition, by requiring consent, or by imposing rigid price or timing conditions on transfer.

Options to purchase land are future purchase rights and generally fall within RAP analysis.

• A stand-alone option “to A, his heirs and assigns, at any time in the future” can violate the RAP because it might be exercisable beyond lives in being plus 21 years.
• An option appurtenant to a lease (a tenant’s option to buy the leased premises during the lease term) is treated more leniently:
  • Most courts and the MBE view such lease‑embedded options as not violating RAP because the lease term and option are tied to present, identified parties and a specific period.

RAP analysis typically asks:

• Is there any possibility that the option could be exercised more than 21 years after all relevant lives in being at creation are dead?
• If yes, the option is void from the outset.

Additionally, even if not void under RAP, overly long or inflexible options may be attacked as an unreasonable restraint on alienation.

Key Term: Unreasonable Restraint on Alienation
A restraint on transfer that is so extensive in duration or restrictive in price or conditions that it unacceptably impairs marketability; such restraints are invalid even if they do not technically violate the RAP.

Factors suggesting unreasonableness:

• Indefinite or very long duration,
• Fixed price far below anticipated market value,
• Restraint not limited to a specific purpose (e.g., not part of a short-term business arrangement).

Worked Example 1.1

Owner offers Buyer the option to purchase Blackacre for $200,000 at any time within the next 60 days. Buyer pays Owner $100 for this option. Thirty days later, Owner receives an offer from Third Party to buy Blackacre for $220,000 and notifies Buyer that the option offer is revoked. Buyer immediately sends Owner a written notice exercising the option. Is there a valid contract for the sale of Blackacre between Owner and Buyer?

Answer:
Yes. The elements of a valid option were present: a written offer to sell on specific terms, Owner’s promise to keep the offer open for 60 days, and separate consideration ($100) from Buyer. The option made the offer irrevocable during the option period, so Owner’s attempted revocation on day 30 was ineffective. Buyer’s timely written exercise within 60 days created an enforceable land sale contract.

Worked Example 1.2

Seller signs a writing stating: “For the next 30 days, I agree to sell Whiteacre to Buyer for $500,000.” The writing is signed by Seller and delivered to Buyer. Buyer pays nothing for this right. On day 10, before Buyer says anything, Seller sells Whiteacre to Third Party, a BFP with no notice of Buyer’s writing. Buyer then sends Seller a letter accepting the offer on day 12. Can Buyer enforce the sale against Seller?

Answer:
Probably not. Although Seller’s writing satisfies the Statute of Frauds for a land sale, there was no consideration to support an option. Therefore, Seller’s promise to keep the offer open for 30 days was revocable. Seller’s sale to Third Party on day 10 operated as a revocation of the offer. Because the offer was revoked before Buyer’s acceptance on day 12, no contract formed between Seller and Buyer. Third Party, as a BFP without notice, takes free of Buyer’s claim.

Worked Example 1.3

Owner gives Tenant a 5‑year lease of Blackacre “together with an option to purchase Blackacre at any time during the lease term for $300,000.” Tenant pays $1,000 option price. Does the option violate the Rule Against Perpetuities?

Answer:
No. Options appurtenant to a lease and exercisable during the lease term are generally upheld despite RAP concerns. The option is limited to the 5‑year lease period and tied to identifiable parties; it cannot be exercised indefinitely beyond lives in being plus 21 years. On the MBE, such lease‑embedded options are treated as exempt from RAP.

Worked Example 1.4

Owner grants Buyer a 90‑day option to purchase Greenacre for $400,000, supported by $500 option price. The option states that exercise must be by “written notice received by Owner at Owner’s office by 5:00 p.m. on April 1.” Buyer mails a written notice at noon on April 1; Owner receives it at 10:00 a.m. on April 2. Owner refuses to sell, arguing that the option expired. Is Buyer likely to prevail?

Answer:
No. The option requires receipt of written notice by a specific time and place. The mailbox rule does not apply to option exercise unless the contract so provides. Because Owner did not receive Buyer’s notice until after 5:00 p.m. on April 1, the exercise was late, and the option expired. Absent waiver by Owner, Buyer cannot compel the sale.

Rights of First Refusal (ROFRs)

A right of first refusal (ROFR) is a conditional purchase right. The holder cannot compel the owner to sell, but if the owner decides to sell on terms within the scope of the ROFR, the holder has the right to purchase on those terms before the owner can sell to a third party.

Creation and Content

Like options, ROFRs must generally satisfy the Statute of Frauds when they relate to land:

• A writing signed by the owner,
• Identifying the property and parties,
• Describing the nature of the right (e.g., “right of first refusal to purchase the property if Owner receives a bona fide offer to buy”),
• Often specifying how notice must be given and how long the holder has to respond.

ROFRs may be:

• Fixed-price ROFRs: e.g., “R has a ROFR to buy for $300,000 if Owner ever sells.”
• Market-based ROFRs: e.g., “R may purchase on the same terms as any bona fide third‑party offer Owner is willing to accept.”

Market-based ROFRs are more likely to be considered reasonable restraints and to survive RAP challenge.

Triggering the ROFR

Typically, a ROFR is triggered when two steps occur:

1. The owner receives a bona fide offer from a third party on acceptable terms (including price and conditions); and
2. The owner decides to accept that offer or is ready to enter into such a contract.

At that point, the owner must follow the procedure in the ROFR:

• Give the holder notice of the offer and its terms, and
• Offer the property to the holder on those same material terms.

Issues frequently tested:

• Non-sale transfers: ROFRs are usually triggered only by voluntary sales. Transfers by gift, devise, or intra-family transfer may not trigger the ROFR unless the document expressly covers such transactions.
• Internal restructurings: Transfers to a wholly owned entity, mergers, or corporate reorganizations may or may not trigger the ROFR depending on the language. On the MBE, unless the clause is broad, assume only arms‑length sales to third parties trigger it.
• Package deals: If the owner receives an offer for multiple parcels in a package, many courts require good faith in allocating the price to the burdened parcel or otherwise accommodating the ROFR holder’s right. MBE questions tend to simplify and avoid detailed package‑deal valuation issues; focus on whether the holder is being allowed to match the economic deal on the burdened parcel.

Exercise of a ROFR

To exercise a ROFR, the holder must match the material terms of the triggering third‑party offer within the time stated in the agreement.

• Matching price and economic terms: The holder must agree to pay the same price and follow the same payment structure (cash vs. financing, earnest money amount, closing date, contingencies such as financing or inspections).
• Minor, nonmaterial differences (e.g., choice of title company, a slight change in closing date that does not prejudice the seller) may be tolerated, but on the MBE, assume that any alteration of major terms is a counteroffer, not a valid exercise.
• If no time for exercise is specified, the holder must act within a reasonable time after notice.

Failure to exercise in time:

• Terminates the holder’s right with respect to that particular transaction.
• The owner may then sell to the third party on the same terms offered to the holder.
• Some ROFRs are “one time only”; others remain in effect for future offers until they expire by their terms.

Worked Example 1.5

Landlord includes a clause in Tenant's 5‑year lease stating: "Tenant shall have the right of first refusal to purchase the leased premises." Three years into the lease, Landlord receives a bona fide offer from Buyer for $500,000 cash, closing in 30 days. Landlord notifies Tenant of the offer. Tenant responds, "I accept, but I need 90 days to secure financing." Has Tenant validly exercised the ROFR?

Answer:
Likely no. A ROFR holder must typically match the material terms of the third‑party offer. Buyer offered cash with a 30‑day closing. Tenant’s response adds a financing contingency and extends closing to 90 days. This is a counteroffer, not a matching acceptance. Tenant has likely failed to exercise the ROFR, and Landlord may sell to Buyer.

Worked Example 1.6

Owner grants Neighbor “a right of first refusal to purchase Blackacre for $300,000 if Owner ever decides to sell.” Two years later, Owner receives an offer from Third Party to buy Blackacre for $320,000 cash. Owner wants to accept. What must Owner do first?

Answer:
Owner must offer Blackacre to Neighbor at $320,000, not $300,000. Although the ROFR mentions $300,000, this is best interpreted as defining Neighbor’s right to match market terms; courts often construe such clauses to require matching the bona fide offer price, especially when the fixed price would be far below current value and thus an unreasonable restraint. On the MBE, when a ROFR references a fixed price but a clear market-based offer has arisen, expect the analysis to focus on matching the third‑party offer to avoid an unreasonable restraint on alienation.

RAP and Restraints on Alienation in ROFRs

The status of ROFRs under RAP is more complex than for options:

• Some courts apply the RAP strictly to ROFRs, especially when the right is granted “to X, its heirs and assigns” without any time limit or is clearly assignable indefinitely.
• Many modern courts instead analyze ROFRs under the doctrine of unreasonable restraints on alienation, asking whether the restriction is reasonable in duration and price mechanism.

Key considerations:

• Duration: A ROFR limited to a reasonable number of years (e.g., 10 or 20 years) is more likely to be upheld. A perpetual ROFR running “to grantee, its heirs and assigns forever” is more likely to be void either under RAP or as an unreasonable restraint.
• Pricing mechanism:
  • A ROFR based on matching bona fide market offers is usually considered reasonable.
  • A fixed‑price ROFR that could be exercised decades later at a price far below anticipated market value is more likely to be an unreasonable restraint.

On the MBE:

• A ROFR granted “to the grantee, its heirs and assigns” with no time limit is a prime candidate for RAP violation (answer choice (d) in Question 3).
• A ROFR granted to a named, living individual, not expressly assignable and of ordinary duration, is typically treated as valid (answer choice (c) in Question 3).

Running with the Land and Assignability

ROFRs can be:

• Personal (in gross): Benefiting a particular individual or entity only. These typically do not run with the land and cannot be assigned unless the agreement permits assignment.
• Appurtenant: Tied to ownership of neighboring land or a leasehold, intended to benefit successors. These can run with the land if:
  • There is intent to bind successors (“heirs and assigns” language),
  • The ROFR “touches and concerns” the land (affects the rights of landowners as such), and
  • Successors have notice (e.g., through recording).

If the ROFR runs with the land and is recorded, later purchasers of the burdened parcel take subject to it.

Termination of ROFRs

A ROFR can terminate by:

• Expiration of its stated duration,
• The holder’s waiver (sometimes only for a particular transaction),
• Merger (e.g., the ROFR holder acquires the property),
• Release by the holder,
• Violation of RAP or invalidation as an unreasonable restraint on alienation.

Comparing Options and ROFRs: Common Exam Pitfalls

Understanding the differences between options and ROFRs is important for MBE questions.

• Power to compel sale:

  • Option: Yes—holder can force a sale by timely, proper exercise, even if owner would prefer not to sell.
  • ROFR: No—holder can buy only if owner decides to sell on terms within the ROFR’s scope.

• Consideration requirement:

  • Option: Requires separate consideration to make the offer irrevocable.
  • ROFR: Need not have separate consideration if included as part of a larger bargained-for transaction (e.g., part of a lease or deed). As long as the main contract has consideration, a separate payment for the ROFR is not required.

• Timing of price term:

  • Option: Price is usually fixed at creation.
  • ROFR: Price is often determined by later third‑party offers (market-based) or by a fixed formula.

• Exercise mechanics:

  • Option: Must strictly comply with stated method and deadline; mailbox rule usually inapplicable.
  • ROFR: Must match material terms of third‑party offer within stated or reasonable time.

• RAP/Restraints:

  • Options (especially in gross, not tied to a lease term) are more likely to violate RAP when unlimited in duration.
  • ROFRs are often analyzed under the reasonableness of restraints on alienation, with indefinite, fixed‑price ROFRs being suspect.

Worked Example 1.7

Owner executes a deed conveying Blackacre “to Buyer and Buyer’s heirs, and Buyer shall have a right of first refusal to repurchase Blackacre for $50,000 if Owner or Owner’s heirs ever decide to sell.” Blackacre is currently worth $200,000. Many years later, Blackacre is worth $1,000,000. Does the ROFR raise any validity concerns?

Answer:
Yes. The ROFR is perpetual (“if Owner or Owner’s heirs ever decide to sell”) and grants a fixed repurchase price ($50,000) that will become increasingly out of line with market value. This combination strongly suggests an unreasonable restraint on alienation and a potential RAP violation because the right could vest far beyond lives in being plus 21 years. On the MBE, such a clause is likely to be struck down.

Exam Warning

A key distinction is that an option creates the power to compel a sale by accepting an existing offer within the option period, while a ROFR merely creates the right to receive an offer on specified terms if the owner decides to sell.

• Options require separate consideration to be irrevocable at common law; ROFRs do not, so long as they are part of a supported contract.
• On timing issues, remember:
  • Options: strict compliance; late exercise equals no contract.
  • ROFRs: failure to match terms or exercise timely allows the owner to proceed with the third‑party sale.

Remedies

When an option or ROFR is breached, courts often treat the holder’s interest as unique and favor equitable remedies.

Remedies for Breach of an Option Contract

If the optionor refuses to perform after a valid exercise:

• Specific performance is the primary remedy:

  • The optionee must show a valid option, proper and timely exercise, and that real property is unique, making money damages inadequate.
  • The court orders the optionor (or the optionor’s estate) to convey the property on the agreed terms.

• Damages:

  • Expectation damages: the difference between the contract price and the market value at the time of breach, plus consequential damages, may be awarded if specific performance is unavailable.
  • Reliance damages: reimbursement for expenditures made in reliance on the option (e.g., investigation, financing costs) in some cases.

If the property has been sold to a third party:

• If the third party was a BFP without notice, specific performance against the third party is usually not available; the optionee’s remedy is typically damages against the optionor.
• If the third party had actual or record notice of the option, the optionee can often obtain specific performance against the third party, forcing conveyance upon payment of the contract price.

Remedies for Breach of a ROFR

If the owner sells to a third party without honoring the ROFR:

• Before closing, the holder can seek an injunction to prevent the sale from closing.
• After closing:
  • If the third party had notice (actual or record) of the ROFR, courts may order specific performance, requiring the owner (and sometimes the third party) to convey the property to the ROFR holder on the matching terms.
  • If the third party was a BFP without notice, the ROFR holder’s remedy is generally limited to damages from the seller.

Measure of damages:

• Often the difference between the price the holder would have paid and the fair market value at the time of the wrongful sale, plus consequential damages (e.g., costs incurred in attempting to enforce the right).

Worked Example 1.8

Owner grants Neighbor a valid, recorded ROFR to purchase Blackacre on the same terms as any bona fide third‑party offer. Owner later contracts to sell to Buyer for $600,000, without notifying Neighbor. Buyer knows of the recorded ROFR. After closing, Neighbor learns of the sale and promptly sues. What remedy is Neighbor most likely to obtain?

Answer:
Neighbor can likely obtain specific performance of the ROFR. Because the ROFR was recorded, Buyer had constructive notice; the facts indicate actual notice as well. Buyer is not a protected BFP. Neighbor can compel a conveyance of Blackacre by paying the same $600,000 price and accepting Buyer’s contract terms, displacing Buyer’s title.

Key Point Checklist

This article has covered the following key knowledge points:

• An option contract is a separate, binding contract that makes an original offer irrevocable for a stated period; it requires a writing (for land), definite terms, and separate consideration (the option price).
• The option price (option premium) is distinct from the land’s purchase price and is usually nonrefundable if the option is not exercised.
• Proper exercise of an option requires strict compliance with the method and timing specified; the mailbox rule usually does not apply.
• Once an option is validly exercised, a binding land sale contract arises, and equitable conversion generally treats the buyer as equitable owner of the land.
• Options to purchase land are generally subject to the Rule Against Perpetuities, except lease‑embedded options exercisable during the lease term.
• A Right of First Refusal (ROFR) is a conditional right: it does not compel the owner to sell, but requires the owner to offer the property to the holder on specified terms if the owner decides to sell.
• A ROFR is normally triggered by the owner’s decision to accept a bona fide third‑party offer within the ROFR’s scope; the holder must match the material terms within the allowed time.
• ROFRs and long‑duration, fixed‑price options may be invalid under the RAP or as unreasonable restraints on alienation, especially when perpetual or substantially underprice future market value.
• Both options and ROFRs are generally assignable unless the agreement makes them personal; options and ROFRs may run with the land if appurtenant, intended to bind successors, and recorded.
• For both options and ROFRs, specific performance is the primary remedy for breach when the holder properly exercises or should have been offered the property and the breaching party (or a purchaser with notice) refuses to convey.

Key Terms and Concepts

• Option Contract
• Right of First Refusal (ROFR)
• Optionor
• Optionee
• Option Price (Option Premium)
• Rule Against Perpetuities (RAP)
• Restraint on Alienation
• Unreasonable Restraint on Alienation
• Specific Performance
• Equitable Conversion
• Bona Fide Purchaser (BFP)