## Facts

- Hancock Bank and Trust Company owned stock in 1025 Hancock, Inc., which owned a fourteen-story apartment building in Quincy, Massachusetts; the property was subject to a large mortgage.
- The bank’s executive vice president sent Harold J. Kanavos a letter agreement stating the bank would pay him \$40,000 for surrendering an earlier option and granting him a 60-day right to match any sale offer for the stock.
- The bank later agreed to sell all of the stock to a third party for \$760,000 and completed the sale without notifying Kanavos or giving him the contractually promised chance to match the offer within the 60-day period.
- Kanavos sued for breach of the right of first refusal/option-to-match.
- On retrial, the jury found the property’s value at \$4,000,000, and damages were calculated using an equity-based formula; the trial judge declined to instruct that Kanavos had to prove he was financially able to buy during the option period.
- The bank appealed, arguing Kanavos could not recover damages unless he proved he was “ready, willing, and able” to purchase during the option window.

## Issues

1. Whether recovery of damages for breach of a right of first refusal depends on the holder’s financial ability to purchase during the relevant option period.
2. If financial ability is required, whether the burden of proof rests on the nonbreaching option holder or the repudiating seller.

## Decision

- The court held that the holder’s ability to purchase during the option period is a required element of a damages claim for breach of a right of first refusal.
- The court held that the plaintiff bears the burden of proving that, with proper notice, he would have been ready, willing, and able to purchase on the offered terms within the option period.
- The trial judge erred by failing to instruct the jury on the readiness/willingness/ability requirement.
- The judgment was reversed and the case was remanded for a new trial limited to damages, focusing on whether Kanavos could have performed financially during the option period.

## Legal Principles

- When contractual duties are roughly concurrent, expectancy damages for the other party’s repudiation require proof the claimant could have performed his own obligation when performance was due.
- A right of first refusal (or option to match) supports damages only if the holder proves that, had notice been given, he would have exercised the right and could have paid within the contractual time.
- If neither side could have performed, repudiation does not create recoverable expectancy damages because the claimant has not shown a lost bargain he could have realized.
- The burden to prove readiness, willingness, and ability to perform rests on the party seeking damages, particularly where the relevant financial information is primarily within that party’s control.
- Failure to instruct the jury on an essential element of damages entitlement requires a new trial when the record does not conclusively establish that element.

## Conclusion

A seller’s breach of a right of first refusal does not, by itself, establish entitlement to expectancy damages; the holder must prove he was ready, willing, and able to purchase within the option period, and the holder bears that burden, requiring a new damages trial when the jury was not instructed on that element.


Kanavos v. Hancock Bank & Tr. Co., 395 Mass. 199 (1985)