Key Takeaways

  • A bonafide offer is an offer made in good faith, legally valid, and capable of acceptance without fraud, coercion, or misrepresentation.
  • These offers are essential in real estate, leases, joint ventures, and franchise agreements, often triggering rights like the right of first refusal.
  • A bonafide offer must include legitimate terms, fair market value, and the ability of the buyer to perform, not just a symbolic or sham proposal.
  • Courts carefully analyze whether an offer qualifies as bonafide, often considering buyer intent, financing ability, and absence of hidden conditions.
  • Related concepts include bonafide error (unintentional mistakes made in good faith) and bonafide purchaser (a buyer who acquires property without notice of defects).
  • Transfers within families may still qualify as bonafide business transactions if done at arm’s length and without donative intent.

A bona fide offer legal definition involves preemptive rights commonly used by real estate lawyers. You'll find these in a number of different contexts, including office and retail leases, residential condos and co-ops, ground leases, planned communities, joint ventures, and franchise agreements. Every preemptive right imposes a burden on the party granting the bonafide offer and the property at stake.

What Is a Bonafide Offer?

The right of first offer (ROFO), or right of first opportunity, allows the holder an opportunity to reply to an offer that the grantor was willing to make.

Meanwhile, the right of first refusal (ROFR) allows the holder an opportunity to match an offer received from a third-party or made to the grantor.

In either circumstance, the grantor is typically free to sell the property in question to others if the holder does not exercise his right.

ROFOs and ROFRs are usually given to the holder as part of a larger transaction, such as a lease, sales contract, or joint venture agreement.

A bonafide option provides unilateral power to the holder, allowing him to exercise his right to purchase the property. In the case of a lease, it can also shorten or extend the terms.

Most ROFRs occurs when a landowner receives a bonafide offer from a third-party. When this happens, the landowner is usually required to give notice. The holder must then use it or lose i

Key Characteristics of a Bonafide Offer

For an offer to be recognized as a bonafide offer, it must meet certain criteria. These characteristics ensure that the offer is genuine, enforceable, and not merely a strategic tactic:

  • Good Faith Intent – The offer must be made honestly, without hidden motives or attempts to manipulate the market.
  • Legally Binding Terms – The terms must be clear, specific, and capable of forming a binding contract if accepted.
  • Financial Capability – The buyer must demonstrate the means to complete the transaction, often through proof of funds or financing approval.
  • Fair Market Value – The price offered should reflect market reality, not a nominal or artificially low amount.
  • Absence of Fraud or Coercion – Offers that rely on misrepresentation or undue pressure are not considered bonafide.

What's Included in a Bonafide Offer?

A bonafide offer is generally made in good faith and able to be accepted. Even a nonbinding letter of intent can serve as a bonafide offer. Any offer that includes "extra" terms may be considered a bonafide offer. Examples include government approval or an agreement to restrict the property in question.

The term "sale" is interpreted broadly but may transfer the landowner's equitable title. Gifts, foreclosures, ancillary transfers from a divorce, and partitions are not usually included in the term "sale."

Examples of Bonafide Offers in Practice

Bonafide offers appear in various legal and business settings. Common examples include:

  • Real Estate Sales – A third-party making a formal purchase offer for a home, triggering a tenant’s right of first refusal.
  • Employment Contracts – A legitimate job offer with defined terms of compensation, role, and duration.
  • Business Acquisitions – A written proposal to buy a company or its assets at fair market value, backed by financing commitments.
  • Lease Transactions – An offer by a tenant to extend or modify lease terms based on standard market conditions.

These examples show that a bonafide offer must be substantive, realistic, and enforceable, not hypothetical or conditional on vague circumstances.

What Is a Bonafide Error?

A bonafide error is an unintentional mistake that can be corrected without legal recourse. Since bonafide literally means "in good faith," a bonafide error occurs when one party doesn't follow the law to collect a debt. An error in legal judgment does not usually fall under a bonafide error.

A bonafide error may occur if a creditor continues to try to collect a debt that's already been paid. If the payoff wasn't recorded properly due to a clerical or systematic error, the collector may claim a bonafide error during prosecution.

Bonafide Purchaser vs. Bonafide Offer

While related, a bonafide purchaser is distinct from a bonafide offer. A bonafide purchaser (BFP) is a buyer who acquires property in good faith, for value, and without notice of competing claims or defects in title. Courts often protect BFPs against prior unrecorded interests.

The connection is that a bonafide offer may lead to a transaction where one party becomes a bonafide purchaser. However, not all bonafide offers result in BFP status; the purchaser must also meet the requirements of acting without notice of adverse claims.

Family Members as Bonafide Business Transactions

Taxable gift transfers occur when a property is transferred to another party for less than the full consideration of its worth. The amount by which the value is exceeded is deemed a gift. Such a transfer of property for full consideration does not constitute a gift for tax purposes.

Treasure regulations make it clear that the gift may not be applied to a transfer for an adequate and full consideration. Rather, the gift tax depends on the facts relating to the transfer and the circumstances surrounding the giving, as opposed to the motive of the donor.

This makes the intent on the part of the donor an irrelevant element in such an application.

Regardless, a transfer of property within a family will always garner close inspection. A transfer will be viewed as something that took place throughout the ordinary course of business. It will be considered adequate consideration if it satisfies the regulations described above. There are the three primary requirements. The transfer must be:

  • bona fide
  • transferred at arm's length
  • free from any intent on the part of the donor

To be considered bona fide, each party needs to be settling an actual dispute, not merely colluding to make the transaction look like something it's not.

To be transferred at an arm's length, the transfer must occur in the exact same manner as it would if you were dealing with a stranger.

To remain free from any intent on the part of the donor, the transfer cannot be spurred from a place or love or affection, or any other motive that would prompt the giving of a gift.

Courts frequently decide whether an offer qualifies as bonafide. Some factors courts consider include:

  • Objective Evidence of Intent – Did the parties act as though they were negotiating at arm’s length?
  • Proof of Financing – Was the buyer financially capable of completing the deal?
  • Market Comparisons – Was the price consistent with similar transactions in the market?
  • Timing and Context – Was the offer made in a way that suggests genuine intent, or merely to satisfy a contractual technicality?

If an offer is deemed sham, collusive, or artificially structured, courts may invalidate it. By contrast, an offer supported by documentation, negotiations, and demonstrable ability to close is usually upheld as bonafide.

Frequently Asked Questions

  1. What does bonafide mean in law?
    Bonafide means "in good faith," generally referring to actions or agreements made honestly, without fraud or intent to deceive.
  2. How do I know if an offer is a bonafide offer?
    An offer is bonafide if it is genuine, backed by enforceable terms, reflects fair market value, and comes from a party capable of completing the transaction.
  3. Can a family member make a bonafide offer?
    Yes, but the transaction must be at arm’s length, for adequate consideration, and free from donative intent to qualify as bonafide.
  4. What is the difference between a bonafide offer and a bonafide purchaser?
    A bonafide offer is a good faith proposal to enter into a contract, while a bonafide purchaser is someone who buys property without notice of defects or competing claims.
  5. Why do courts scrutinize bonafide offers?
    Courts review these offers to ensure they are genuine, not sham transactions used to bypass legal obligations such as rights of first refusal.

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