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January 24, 2019

Counteroffer


Word of the day

Counteroffer

A new offer made in response to an offer received from an offeror. A counteroffer has the effect of rejecting the original offer, which cannot thereafter be accepted unless revived by the offeror’s repeating it.

Once the buyer submits an offer to buy for the seller’s acceptance, if the seller makes any change to the offer—no matter how slight—such change constitutes a counteroffer, and terminates the original offer and bars its subsequent acceptance. Thus, if the seller changes the suggested closing date from 10:00 am November 10, 2013, to 11:00 am November 10, 2013, initials the change, and signs the sales contract, the seller has made a counteroffer. The roles of the parties then reverse. There is no obligation on the buyer to either accept or reject the counteroffer. To create a valid contract, the buyer must accept the terms of the counteroffer within a certain period of time. Note that a simple inquiry as to whether the offeror would be willing to change the terms of an offer is not sufficient to constitute a rejection of the offer or a counteroffer.

A common practice has been for the seller to make a change to the buyers’ sales contract, initial and date the change, and transmit it to the buyers for acceptance. If the buyers then wanted to make a change to the altered contract, they in effect would be making a counter-counteroffer.

It is poor practice to rely on a contract that has many initialed changes, because it is difficult to determine at what point a valid contract actually exists. The parties should execute a written counteroffer. If a buyer wishes to make a counteroffer in response to the seller’s counteroffer form, the buyer should probably begin the process anew by completing a new sales contract offer.

Because it is important to be able to determine the chronology of events, each change should be time-dated. In addition, the broker must give a copy of the changes to the signing party at the time such changes are made, not afterward.
 

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