NDA

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Non-Disclosure Agreements (commonly abbreviated as NDA) are documents for certifying the legality of information sharing/divulgence and is usually a binding document ensuring confidentiality on a specific project or of general business operations between a client a service provider (buyer and seller, or contractor and contractee).


Right of First Refusal

Right Of First Refusal (commonly abbreviated as ROFR or RFR) is a contractual right that gives its holder the option to enter a business transaction with the owner of something, according to specified terms, before the owner is entitled to enter into that transaction with another third party. This goes for anything from being the first to buy a product/property/service (i.e. a whole company or its brand/line, a new house, exclusive access to customer service, etc) to being the first to receive a position/contract/investment (i.e. tentative job offer typically to switch companies, potential contractual arrangement for consulting services on a new project typically when dependent on the contracting party getting an anticipated agreement with another entity, opportunity to invest into a new company and earn larger share percentage before others do so, etc).

Right Of First Offer (commonly abbreviated as ROFO, also known as a Right of First Negotiation) differ from a ROFR in that the ROFO merely obliges the owner to undergo exclusive good faith negotiations with the rights holder before negotiating with other parties. A ROFR is an option to enter a transaction on exact or approximate transaction terms. A ROFO is merely an agreement to negotiate.

EXAMPLES

  • ROFR - Abe owns a house that he plans to sell to Bo for $1 million. However, Carl holds a right of first refusal to purchase the house. Therefore, before Abe can sell the house to Bo, he must first offer it to Carl for $1 million. If Carl accepts, he buys the house instead of Bo. If Carl declines, Bo may now buy the house at the proposed $1 million price.
  • ROFO - Carl holds a ROFO instead of an ROFR. Before Abe can negotiate a deal with Bo, he must first try to sell the house to Carl. Abe and Carl attempt to reach a deal. If they reach an agreement, Abe sells the house to Carl. However, if they fail, then Abe is free to start fresh negotiations with Bo without any restriction as to price or terms.


In brief, a ROFR is similar in concept to a Call Option. A Call Option (in the Financial industry often simply labeled a "call"), is a financial contract between two parties, the buyer and the seller of this type of option. The buyer of the call option has the right, but not the obligation to buy an agreed quantity of a particular commodity or financial instrument (the underlying) from the seller of the option at a certain time (the expiration date) for a certain price (the strike price). The seller (or "writer") is obligated to sell the commodity or financial instrument to the buyer if the buyer so decides. The buyer pays a fee (called a premium) for this right.



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Security | Cloud Computing