California First-Year Law Students' Exam (Baby Bar) — MCContractsEasy
A homeowner offers to sell their antique armchair to a collector for $500. The collector responds, "I'll give you $400 for it." The homeowner declines. Two days later, the collector contacts the homeowner and says, "I accept your original offer of $500." Is there a valid contract?
- ANo, because the homeowner did not immediately accept the collector's counteroffer.
- BYes, because the collector eventually accepted the original offer.
- CYes, if the homeowner had not yet sold the armchair to someone else.
- DNo, because the collector's counteroffer terminated the original offer.
Show answer & explanationAnswer & explanation
Correct answer: D. No, because the collector's counteroffer terminated the original offer.
A counteroffer acts as a rejection of the original offer and simultaneously creates a new offer. Once the original offer is rejected, it can no longer be accepted unless it is restated by the offeror.
Why the other options are wrong
- A. The homeowner was not obligated to accept the counteroffer, but declining it doesn't revive the original offer.
- B. The original offer was terminated by the counteroffer, making it unavailable for acceptance.
- C. The availability of the armchair is irrelevant if there is no valid offer to accept.
Counteroffer
A response to an offer that changes its terms and conditions. It acts as both a rejection of the original offer and a new offer.
- Terminates the original offer.
- Creates a new offer.
- Shifts the roles of offeror and offeree.
Memory trick: Rejecting an offer is like hitting a reset button, you can't go back.