ROFR and non-cash consideration

[lark]

Do the DVC rules permit sales of DVC memberships for non-cash consideration, either in whole or part? And if so, how does the affect ROFR.

For example, suppose someone wanted to sell his contract to his mechanic for $50/point plus repairs to an alternator? Or something like that.

 

[disney-super-mom]

I'm just guessing here, but regardless of the "deal", I have a feeling there's no way around ROFR.

The only way to do some type of "trade" like this (I'm guessing) is if a normal, legal resale contract was written and the mechanic paid full price-per-point (high enough to get through ROFR), and then the seller would have to give the buyer cash back on the side (privately - not part of the legal written deal), so in the end it would equal out to the buyer (the mechanic) paying $50 per point.

Did that make sense?

 

[lark]

I'm just guessing here, but regardless of the "deal", I have a feeling there's no way around ROFR.

The only way to do some type of "trade" like this (I'm guessing) is if a normal, legal resale contract was written and the mechanic paid full price-per-point (high enough to get through ROFR), and then the seller would have to give the buyer cash back on the side (privately - not part of the legal written deal), so in the end it would equal out to the buyer (the mechanic) paying $50 per point.

Did that make sense?

Yes, it makes perfect sense. It all depends on what the language of the contract is. If the contract flat out prohibits resales for anything but cash, then it's an easy answer. If the contract does not prohibit resales for things other than cash, then it all depends on what the ROFR provisions say. If they say that disney can buy the contract for the same "amount," that would be one thing, but if it says that disney can buy the contract under the same "terms" as agreed to buy the buyer and seller, then disney might have to actually pay to fix your alternator to exercise ROFR (in my example).

I'm not a member, so I don't have access to the contract language.

 

[disney-super-mom]

Yes, it makes perfect sense. It all depends on what the language of the contract is. If the contract flat out prohibits resales for anything but cash, then it's an easy answer. If the contract does not prohibit resales for things other than cash, then it all depends on what the ROFR provisions say. If they say that disney can buy the contract for the same "amount," that would be one thing, but if it says that disney can buy the contract under the same "terms" as agreed to buy the buyer and seller, then disney might have to actually pay to fix your alternator to exercise ROFR (in my example).

I'm not a member, so I don't have access to the contract language.

Well actually that's not exactly what I was saying. I am assuming that Disney DOES NOT allow resales for anything other than cash.

If a seller and buyer wanted to do some type of trade instead, the resale contract must still be written as an all cash deal, just like any resale contract.

The trade would have to be done on the side, privately between the seller and the buyer. Disney would have nothing to do with this, nor would they know about it.

The buyer would pay full price per point (the going resale rate), hopefully getting through ROFR. If it does get through ROFR, then the seller would give the buyer cash back for the difference between the actual selling price-per-point written on the contract, and the verbally agreed upon price-per-point between the seller and the buyer. If the buyer agreed to pay $50 per-point plus rendering services, but paid $85 per point for a 200 point contract to get through ROFR, then the seller would privately refund the difference ($35 per point) to the seller of $7,000.

If Disney exercises ROFR and purchases the contract as it is written, then the buyer would be refunded his/her entire deposit, just like any contract that didn't make it through ROFR.

I hope I explained it better this time.

 

[lark]

Well actually that's not exactly what I was saying. I am assuming that Disney DOES NOT allow resales for anything other than cash.

If a seller and buyer wanted to do some type of trade instead, the resale contract must still be written as an all cash deal, just like any resale contract.

The trade would have to be done on the side, privately between the seller and the buyer. Disney would have nothing to do with this, nor would they know about it.

The buyer would pay full price per point (the going resale rate), hopefully getting through ROFR. If it does get through ROFR, then the seller would give the buyer cash back for the difference between the actual selling price-per-point written on the contract, and the verbally agreed upon price-per-point between the seller and the buyer. If the buyer agreed to pay $50 per-point plus rendering services, but paid $85 per point for a 200 point contract to get through ROFR, then the seller would privately refund the difference ($35 per point) to the seller of $7,000.

If Disney exercises ROFR and purchases the contract as it is written, then the buyer would be refunded his/her entire deposit, just like any contract that didn't make it through ROFR.

I hope I explained it better this time.

No, I understood you from the start. I think it was me that wasn't very clear.

What I meant to say was that if the disney membership agreement does not permit resales other than for 100 percent cash, it's probably not worth it. A business lawyer would know better, but ultimately, I would think that it would be very risky (and maybe even fraud) to try to circumvent ROFR with a side deal to rebate some of the money back. The parties would probably never get caught, but I would think this would be a serious no-no, either under the membership agreement or applicable law. (For example, what if disney exercised ROFR at the $85 price in that example -- disney has just basically be defrauded into paying $85, since those weren't the real terms of the buyer's and seller's agreement.)

 

[disney-super-mom]

No, I understood you from the start. I think it was me that wasn't very clear.

What I meant to say was that if the disney membership agreement does not permit resales other than for 100 percent cash, it's probably not worth it. A business lawyer would know better, but ultimately, I would think that it would be very risky (and maybe even fraud) to try to circumvent ROFR with a side deal to rebate some of the money back. The parties would probably never get caught, but I would think this would be a serious no-no, either under the membership agreement or applicable law. (For example, what if disney exercised ROFR at the $85 price in that example -- disney has just basically be defrauded into paying $85, since those weren't the real terms of the buyer's and seller's agreement.)

How is Disney defrauded? The written terms of the legal contract is the same as any other contract. What the seller and buyer agree to on the side is between them. It has nothing to do with Disney.

Once the contract goes through closing, it doesn't matter what the seller and buyer does. For example, the seller could say to the buyer, "You know, I sure would like some mechanical work done on my vehicles. How about I pay you $7000 for you to do the work?"

Do you see what I'm saying? In no way is that fraud. It's just another deal that happens to be between the same two people.

 

[RobDoc]

I think you can make and accept offers without cash, but since EVERYTHING has some value, DVC would demand to know (and has a right to know) the cash value for the offer when it goes to ROFR. In addition, that offer would likely fall under IRS rules regarding barter agreements, which opens up a whole other issue.

It may be worth a try, just be aware that DVC does hold all of the cards when it comes to ROFR.

Good luck!

 

[Dean]

DVC will ask for the value and work from there. While I personally believe that using non cash is legal and DVC could be pushed to proceed and give ROFR, I doubt it is worth to go through the aggravation.