November 16, 2011
Authored by: Luke Lantta
In contracts and settlement agreements, we usually see boilerplate defining an individual party as including that individual party’s “heirs, personal representatives, agents, transferees, servants, employees, attorneys, representatives, successors and assigns” or something similar.
You also regularly see a paragraph stating something like “this Agreement shall be binding upon the undersigned and their respective heirs, executors, administrators, successors, transferees, assigns, agents and attorneys.”
The Riley brothers, John, James, and Camden owned some property in Kansas City. James and Rose Mary Anderson purchased a tract of the Riley brothers’ property, but wanted a right of first refusal on an additional tract of the property with a barn on it.
The Riley brothers agreed and they entered into an agreement with the Andersons that provided:
It is agreed that in the event additional acreage is disposed of involving the area between the existing house and the stone barn – including the stone barn, that James Anderson and wife (Rose Mary) will have first option to purchase this area (approx. 2 to 2 1/2 acres) at a cost deemed fair by a competent appraiser.
The Riley brothers all died, with Camden being the last of the three to die. At the time of Camden’s death, the unsold property was in the Camden W. Riley Jr. Trust. Patricia Parker, Camden’s daughter and trustee of the Trust, ultimately sold the property to a developer without first allowing the Andersons a chance to purchase it. So, the Andersons sued for breach of contract and fraud.
After a trial, a jury found in favor of the Andersons, but the trial court granted the defendants’ motion for judgment notwithstanding the verdict. The trial court gave a number of different reasons for granting the motion, one of which was that the agreement between the Riley brothers and the Andersons did not bind anyone other than the three brothers who were signatories and the agreement was not binding on their heirs, successors, or assigns. The Missouri Court of Appeals affirmed.
What the Riley brothers granted the Andersons was a preemptive right. A right of first refusal, or preemptive right, requires the seller, when and if he decides to sell the stipulated piece of property, to first offer the property to the holder of the right, either at the stipulated price or at a price and on the terms the seller is willing to sell. A preemptive right that does not specifically provide that it is binding on the heirs and assigns of the parties and does not indicate an intent that it survive beyond the lifetime of the parties is personal to the parties and expires on death. Thus, the agreement did not bind Camden’s trustee.