Contract Law: Counter-Offer

Why are counter-offers so important? Offer & Acceptance preclude the formation of an enforceable contract. Without a valid offer and a valid acceptance, a contract does not exist, though the parties will sometimes want to change one or more of the terms in a contract by way of a counter-offer.

The Second Restatement of Contracts §39 states that:

1. A counter-offer is an offer made by an offeree to his offeror relating to the same matter as the original offer and proposing a substituted bargain differing from that proposed by the original offer.
2. An offeree’s power of acceptance is terminated by his making of a counter-offer, unless the offeror has manifested a contrary intention or unless the counter-offer manifests a contrary intention of the offeree.

In the practical world, if you ever plan on negotiating to buy a house or asking for a raise/job you may want to consider the following three principles:

• The mere inquiry into an offer does not constitute a counter-offer.
• Once an offer has been terminated, the offeree no longer has the right of acceptance.
• To clarify §39(2) above, unless affirmatively stated otherwise, a counter-offer will terminate the original offer. Meaning, an offeree must explicitly state something to the effect of, “While keeping the original offer in consideration, would you accept something else…” within the actual counter-offer.

However, if an offeree, in its acceptance of an offer, absolves the offeror of a material obligation, the “rules of contract construction and the ‘rules of common sense’” preclude construing that absolution as an additional term that invalidates the acceptance. Rhode Island Dep’t of Transportation v. Providence & Worchester R.R., 674 A.2d 1239 (1996).

Related posts:

1. Contract Law: Termination of an Offer An offer is said to be terminated in the following...
2. Contract Law: Acceptance of an Offer Acceptance of an offer is a manifestation of assent to...
3. Contract Law: Revocation of an Offer Offers can only be revoked by an offeror. An offer...
4. Contract Law: Modification of an Offer An offeror may modify the offer at anytime before acceptance....
5. Contract Law: What is an Offer? "An offer is the manifestation of willingness to enter into...

Tags: Contracts, Law School

This entry was posted on Monday, October 12th, 2009 at 3:27 pm and is filed under Contracts, Law School. You can follow any responses to this entry through the RSS 2.0 feed.