Texas Real Estate Sales Agent ExamContractsMedium
A buyer makes a written offer to purchase a property for $350,000. The seller receives the offer and responds by changing the price to $360,000 and the closing date, then signs and returns it to the buyer. What is the legal effect of the seller's action?
- AThe original offer is still open for the seller's acceptance.
- BThe seller has accepted the buyer's original offer with modifications.
- CThe seller has created a binding contract at $360,000.
- DThe seller has rejected the original offer and made a counteroffer.
Show answer & explanationAnswer & explanation
Correct answer: D. The seller has rejected the original offer and made a counteroffer.
When a seller changes any terms of an offer and returns it to the buyer, it constitutes a rejection of the original offer and the creation of a new offer, known as a counteroffer. The original offer is no longer valid.
Why the other options are wrong
- A. Once a counteroffer is made, the original offer is terminated and cannot be accepted by the seller later.
- B. Acceptance must be unconditional; any change to terms constitutes a counteroffer, not an acceptance with modifications.
- C. A binding contract is only formed when there is a clear offer and acceptance. The seller's action is a new offer, not an acceptance.
Counteroffer Effect
A response to an offer that changes one or more of the original terms. It automatically terminates the original offer and creates a new offer.
- Rejects the original offer.
- Makes the party who receives it the offeree.
- Requires acceptance by the original offeror to form a contract.
Memory trick: Changes Create Counter-Offers, Canceling Original.