Johnson v. Herren - C.A. No. 88-160-II, 1988 Tenn. App. LEXIS 715 (Ct. App. Nov. 10, 1988)

Rule:

All that is required to trigger the right of first refusal is for the seller to make a sales offer. No third party need accept it. Only an offer is required. If a third party does make a buyer's offer and the seller accepts, his acceptance is subject to the outstanding right of first refusal and is the equivalent of a sales offer to the party holding the right of first refusal.

Facts:

A warranty deed conveyed 10.98 acres of the Herren farm to the Johnsons in 1981. The deed gave the Johnsons the right of first refusal of any sales offer on part or all of the remaining acreage. Herren decided to sell the 120-acre farm and informed Johnson of his intent to sell the property. Johnson responded that he could not afford the property, but expressed an interest in purchasing part of the woods behind his house. Three months later, Herren negotiated with Williams regarding the sale of the parcel of land behind Johnson’s house. Herren withdrew the offer to sell Johnson the 120-acre farm. Johnson then brought suit seeking performance of the contract for sale. The trial court awarded Johnson the right to purchase the tract from Herren for the market price of $1,500 per acre and a 25-foot easement for access and utilities. Herren appealed, questioning whether a sale offer was made triggering a contractual right of first refusal.

Issue:

Was there a sale offer that triggered a contractual right of first refusal, thereby warranting the grant of the remedy of specific performance in favor of Johnson? 

Answer:

Yes.

Conclusion:

Upon review, the court held that the trial court correctly found in favor of Johnson, but that the per acre purchase price was set too high. The evidence did not preponderate against the trial court’s finding that Herren made a sales offer that triggered the contractual right of first refusal in the deed between the Herren and Johnson. According to the court, Johnson paid consideration for the right that the sellers would, upon offering the land for sale, offer it first and on the same terms to them. Johnson then had had the right to purchase the land at the offered price or to refuse. As a result of the contract violation and the Herren’s refusal to sell to Johnson the trial court correctly decreed the remedy of specific performance. However, the court was unable to agree with the trial court’s decision setting the price at $ 1,500 per acre based on Johnson’s agreement to pay a fair market value. Only the accepted sales offer was enforceable, and the only credible proof as to the price in the offer was $ 1,000 per acre.