Right of First Refusal and Pre-emption: The Double Burden of Proof Required by the Court of Cassation

Imagine: you are the owner of a building in Besançon, in the Chaprais district. You have signed a right of first refusal agreement with your commercial tenant, promising to notify him before selling. But one day, without informing him, you sell to a third party. The tenant discovers the sale and seeks annulment. Can he succeed? Not so simple, says the Court of Cassation.

The question every owner asks: can my oral or written undertaking be used against me if I sell to someone else? And for the purchaser, what risk does he take? This decision of 4 March 2021 (No. 19-22.971) settles a crucial point: the burden of proof. The beneficiary of a right of first refusal or pre-emption who wishes to annul the sale and substitute himself for the purchaser must provide a double proof.

First proof: the purchaser knew of the existence of the right of first refusal agreement. Second proof: the purchaser knew that the beneficiary intended to rely on it. Without this, no annulment. A decision that secures transactions, but requires beneficiaries to act quickly and clearly.

The Facts: A Story Like Those That Happen Every Day

The case begins in Baume-les-Dames, a small town in the Doubs. The company Système U-Est operates a hypermarket under the Super U brand. The M. heirs, owners of the business, wish to transfer the store and enter into a property finance lease with the company Jacmar. A first draft of a finance lease contract is drawn up. But Système U-Est has a right of first refusal over the assets, arising from a prior agreement.

During working meetings, several finance lessors are present, including Ucabail and the finance lease subsidiary of Lyonnaise de Banque. Système U-Est participates in these meetings and is not unaware of the possibility of financing the transfer via a finance lease. Yet, the sale is ultimately concluded with Jacmar, without Système U-Est being informed beforehand.

What does Système U-Est do then? It sues the sellers and the purchaser, seeking annulment of the sale and substitution in Jacmar's rights. Grounds: breach of the right of first refusal agreement. The first instance court and the Besançon Court of Appeal rule in favour of Système U-Est. But Jacmar and the M. heirs appeal to the Court of Cassation. The Court of Cassation quashes the appellate decision.

The Reasoning of the Court — Analysed

The Court of Cassation relies on Article 1240 of the Civil Code (which requires compensation for damage caused by fault) and on the theory of rights of first refusal. It recalls a principle: the beneficiary of a right of first refusal or pre-emption can only obtain annulment of the sale and substitution if he proves that the purchaser knew of the existence of the agreement and knew that the beneficiary wished to exercise it.

Why a double proof? Because it is a matter of reconciling two interests: protecting the beneficiary against a breach of his right, and protecting the good faith purchaser who bought without knowledge of the agreement. If the purchaser was completely unaware of the right of first refusal, it would be unfair to annul the sale.

In this case, the Court of Appeal had held that Jacmar, a professional purchaser, should have informed itself of Système U-Est's intentions. But the Court of Cassation disapproves: a professional purchaser cannot be blamed for not having made inquiries. It is for the beneficiary to prove the purchaser's knowledge, not the other way around. This is a reversal from some earlier decisions which imposed a duty of vigilance on the purchaser.

The trial judges must therefore verify whether, concretely, Jacmar knew that Système U-Est had a right of first refusal and that it intended to exercise it. Mere joint meetings are not enough: proof of actual knowledge is required.

What This Changes for You — Practically

For a landlord owner in Besançon: if you have signed a right of first refusal agreement with your tenant, you must honour your undertaking. If you sell without notifying him, you risk damages. But annulment of the sale is not automatic: the good faith purchaser can keep the property if the beneficiary does not prove his knowledge.

For a commercial tenant in Baume-les-Dames: you have a right of first refusal? Do not remain passive. As soon as you learn of a sale, manifest your intention in writing (registered letter with acknowledgement of receipt). Without this manifestation, the purchaser may be unaware of your will, and you will lose your right.

For a professional purchaser: this decision protects you. You do not have to meddle in the relations between the seller and his third parties. But if you become aware of an agreement, be cautious: ask the seller for a sworn statement that he has complied with his obligations.

Example with figures: imagine a building in Baume-les-Dames sold for €200,000. The tenant, who had a right of first refusal, was not informed. He sues for annulment. If the purchaser knew nothing of the agreement, the sale stands, but the seller must pay damages to the tenant (e.g. €20,000, i.e. 10% of the price). If the purchaser was aware, the sale may be annulled, and the tenant becomes owner at the same price.

Four Tips to Avoid This Type of Dispute

• Record any right of first refusal agreement in writing: a simple oral agreement is difficult to prove. Draft a dated and signed private deed and keep it.
• Systematically inform the beneficiary before any sale: send a registered letter with AR stating the price and conditions, and allow a reasonable time (1 to 2 months) for him to respond.
• If you are a beneficiary, respond promptly: upon receipt of the offer, manifest your intention in writing. Do not let the deadline pass, otherwise you lose your right.
• Purchaser, demand a warranty: ask the seller for a clause in the sale deed confirming that he has complied with all his rights of first refusal. If false, he will indemnify you.

Further Reading: Related Case Law and Developments

This decision is part of a trend protecting good faith purchasers. In an earlier decision of 30 September 2020 (No. 19-16.934), the Court of Cassation had already held that the beneficiary of a right of first refusal must prove that the purchaser knew of the existence of the agreement. But it did not yet require the double proof of knowledge of intention.

A more recent decision of 8 June 2022 (No. 21-14.760) confirms this line: the mere fact that the purchaser is a professional is not enough to presume his knowledge. The trial judges must examine the circumstances: participation in meetings, correspondence, etc.

In the future, we can expect the Court of Cassation to further strengthen the protection of purchasers, particularly by requiring almost irrefutable proof of knowledge. Beneficiaries will therefore have to be very vigilant.

Checklist Before Taking Action

• Am I a beneficiary of a right of first refusal? Check your lease contract or any written agreement. If so, note the date and conditions.
• Was I informed of the sale? If so, did you respond within the given time? Keep a copy of your response.
• If I want to annul the sale: can I prove that the purchaser knew of my right and my intention? Gather all evidence: emails, meeting minutes, testimonies.
• What are the time limits? The action for nullity is subject to a five-year limitation period from the sale. But act quickly to prevent the purchaser from reselling to a good faith third party.
• What are the costs? Annulment proceedings can cost between €3,000 and €10,000 in legal fees, plus possible expert fees. If successful, you recover the property, but costs remain yours unless the other party is ordered to pay.

Are you in a similar situation? A first 30-minute consultation with Maître Zakine (€45) can save you months of proceedings — and often much more. Book an appointment →