Opinion ID: 1961992
Heading Depth: 1
Heading Rank: 4

Heading: the agreement in suit

Text: In the instant case, it cannot be said that the terms of Paragraph 5 of the agreement are so clear and unambiguous as to obviate the necessity for construction. Although the first segment of Paragraph 5 speaks of a first option and privilege to renew, it is unquestioned and undisputed that it was never in the contemplation of any party to the agreement that Paragraph 5 conferred a privilege to renew the terms of that agreement. Similarly, the language of the second segment stating the terms and conditions of this agreement shall be extended cannot be taken to mean that either the Association or WPVI-TV was bound to extend the terms of the 1977 agreement. An ambiguity further arises as to what the notice duty of the Association is which is described as being to give WPVI-TV notice of all details of any other bona fide offer. Reference to any other . . . offer could be read to mean that the provision only came into play once WPVI-TV had made an offer. Does bonafide offer mean every genuine offer, every offer which is not a sham offer, which is received by Association, or only such offers as interest the Association? Would the notice by WPVI-TV of an intention to meet or exceed the terms of any such offer of which it had notice terminate all further negotiations, or would a new offer followed by new notice create new rights and obligations. Finally, and we believe most importantly, during what period of time was the Association under a duty to give such notice and during what period of time did WPVI-TV have the right to exercise a right of first refusal? Applying settled principles of contract construction to the language of this agreement will yield a reasonable interpretation capable of performance with regard to each of the ambiguities except for the lack of termination date. Thus, construing the language strictly against appellant whose attorney prepared the agreement, it may reasonably be interpreted as setting forth a right of first refusal which prevents the Association from accepting any offer by a third party without first offering the opportunity to appellant WPVI-TV to meet the terms of the third party's offer and giving WPVI-TV two months in which to decide whether to accept the offer to contract on those terms or waive its right of first refusal. In Gateway Trading Company, Inc. v. Children's Hospital of Pittsburgh, 438 Pa. 329, 265 A.2d 115 (1970) in construing what purported to be an option to purchase land contained in a lease, but which option contained language similar to the agreement herein, the Pennsylvania Supreme Court held that the language created a right of first refusal, described by Professor Corbin as creating the following result: If a third party should make an offer, the owner was privileged not to accept it, and also not to make any offer to the promisee. But the owner was bound by duty not to accept the offer of the third party without first giving an option to the promisee. The court therefore held that: The clear import of the instant rider provision was that the lessor was obliged to give Gateway written notice of the terms of any bona fide offer which it deemed acceptable and to allow Gateway to purchase the property on those terms before any sale to a third party was effected.. . . While the cases on a right of first refusal are not many, a review of such cases together with standard provisions of contract law, establishes the following: A right of first refusal constitutes a promise to offer the res of the right to the promisee for such consideration as the promisor determines to accept on the basis of an offer from a third party before accepting the offer of the third party. A right of first refusal does not require the promisor to offer the res at all. The right of first refusal merely requires that before the promisor accepts an offer of a third party, he must offer the res to the promisee of the right for the consideration he is willing to accept from the third party. Ross v. Shawmut Development Corp., 460 Pa. 328, 333 A.2d 751 (1975); Warden v. Taylor, 460 Pa. 577, 333 A.2d 922 (1975); DeVries v. Westgren, 446 Pa. 205, 287 A.2d 437 (1972); Gateway Trading Co., Inc. v. Children's Hospital, supra, Sun Oil Co. v. Bellone, 292 Pa.Super. 341, 437 A.2d 415 (1981); Steuart v. McChesney, supra, Bobali Corporation v. Tamapa Company, supra. Construing the instant right of first refusal in accordance with the principles thus adopted in this Commonwealth, the provisions of Paragraph 5 carry the clear import that the Association was obliged, during the life of the right of first refusal, to offer the televising rights to WPVI-TV on the terms of any bona fide offer from a third party which it had determined to accept. [19] WPVI-TV then had two months in which to accept that offer, thus exercising its right of first refusal, or to reject that offer, thus waiving its right of first refusal. On this basis, we agree with the lower court that the letter of June 3, 1980 from the Association to WPVI-TV, notifying it of negotiations with WCAU-TV and inviting it to make a new proposal can not be interpreted as inviting appellant to exercise its right of first refusal. The letter established that there was no pending offer which it was determined to accept, but on the contrary indicated that it wished all offers to be placed before it for full study and a determination on June 19. Similarly, appellant's letter of June 16 can only fairly be read as a bid and did not constitute an acceptance of any offer made by the Association. The fact that appellant also made an attempt to bind appellee Association by using self-serving language does not alter the overall import of the letter as an attempt to outbid WCAU-TV and finalize negotiations. As stated in the opinion by Judge Stanley Greenberg in the lower court, Their argument that the increased payment offered was an act of generosity not required under the circumstances and for which they should not be penalized, is not only a little far fetched, but is certainly not consistent with their previous dealings with the Mummers. . . . There was therefore no offer made by appellee Association to appellant WPVI-TV to exercise its right of first refusal, and no acceptance by WPVI-TV in the exchange of letters June 3 to June 16. We cannot agree with the court below, however, that notice in accordance with the agreement was served upon appellant. The only offer which appellee Association determined to accept was the WCAU-TV offer of June 19 which it voted to accept. Appellant received no notice from appellee Association [20] that it had received that offer. Appellant received no notice from anyone that appellee was offering appellant the televising rights on those terms or any terms. On the contrary, appellant received notice, first by the June 23 letter from WCAU-TV and then by service of complaints, that appellee Association had accepted the WCAU-TV offer and that both appellees repudiated the right of first refusal as being unenforceable. [21] Under these circumstances, appellant could not be expected to respond as though it had received normal notice of an offer, requiring acceptance or rejection. Therefore, if Paragraph 5 of the agreement of October 5, 1977 was valid and enforceable and had not earlier terminated, appellant has not received the notice required by the agreement. However, this court is of the opinion that the issue of the validity of a perpetual right of first refusal is not immaterial as held by the court below, but rather is at the center of this controversy.