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Contracts • Contract Formation
K#027
Legal Definition
A counteroffer generally terminates the original offer and creates a new offer. Where a counteroffer has been made, there is no express contract unless that counteroffer has been accepted. However, mere bargaining does not constitute a counteroffer. Like rejections, counteroffers do not terminate option contracts.
Plain English Explanation
Generally, when someone makes you an offer, you have the power of acceptance, meaning you can, if you choose, accept the offer and create a binding contract. Exams like to test grey areas, though. So what happens when the offeree says or does something other than a clear form of acceptance? You need to analyze what they say or do and identify what affect it may have on the original offer.
A counteroffer occurs when someone makes an offer in response to an offer. For example, if someone says, "I'll sell you my iPhone for $500" an offer has been made. If you respond, "How about $400?" you have made a counteroffer which gives the other person the power to accept your offer. Consequently, your counteroffer also acts as a rejection to the original offer, which means you can no longer "accept" the original offer to buy the iPhone for $500.
Note that this can get a little tricky, because not all responses will act as counteroffers. Some responses and inquiries can arguably be only "bargaining." For example, if someone says, "I'll sell you my iPhone for $500," and you respond, "Does it include the headphones?" this would be "mere bargaining" and not be a new offer.
A way to try to sort out "counteroffers" for "mere bargaining" is to ask yourself if it sounds like a demand, or if it sounds like a clarifying question. Demands (especially those with additional terms) will always be offers, while clarifying questions are generally mere bargaining.
A counteroffer occurs when someone makes an offer in response to an offer. For example, if someone says, "I'll sell you my iPhone for $500" an offer has been made. If you respond, "How about $400?" you have made a counteroffer which gives the other person the power to accept your offer. Consequently, your counteroffer also acts as a rejection to the original offer, which means you can no longer "accept" the original offer to buy the iPhone for $500.
Note that this can get a little tricky, because not all responses will act as counteroffers. Some responses and inquiries can arguably be only "bargaining." For example, if someone says, "I'll sell you my iPhone for $500," and you respond, "Does it include the headphones?" this would be "mere bargaining" and not be a new offer.
A way to try to sort out "counteroffers" for "mere bargaining" is to ask yourself if it sounds like a demand, or if it sounds like a clarifying question. Demands (especially those with additional terms) will always be offers, while clarifying questions are generally mere bargaining.
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Related Concepts
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What is the effect of a seller sending non-conforming goods?
What is the effect of including additional or different terms to an offer?
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