California Real Estate Broker ExaminationContractsEasy
A buyer submits an offer on a property, and the seller makes a counteroffer. Before the buyer formally accepts the counteroffer, the seller receives a significantly higher offer from another party and wishes to accept it. What is the seller's legal position regarding the first buyer's counteroffer?
- AThe seller can revoke the counteroffer at any time before it is accepted by the buyer, even if the revocation is not communicated directly.
- BThe seller must formally withdraw the counteroffer and communicate this withdrawal to the buyer before accepting the new offer.
- CThe seller is legally bound to the first buyer's counteroffer once it has been made, regardless of other offers.
- DThe seller can accept the new offer, and the first counteroffer is automatically terminated without further action.
Show answer & explanationAnswer & explanation
Correct answer: B. The seller must formally withdraw the counteroffer and communicate this withdrawal to the buyer before accepting the new offer.
A counteroffer acts as a rejection of the original offer and creates a new offer. The party who made the counteroffer (the seller, in this case) retains the right to revoke it at any time before it is accepted by the other party, provided that revocation is communicated.
Why the other options are wrong
- A. This is incorrect; revocation of an offer or counteroffer must be effectively communicated to the offeree.
- C. This is incorrect; a counteroffer is not a binding agreement until accepted.
- D. This is incorrect; while a new offer might make the seller want to revoke the prior counteroffer, it doesn't automatically terminate it without action and communication.
Revocation of Offer
The withdrawal of an offer by the offeror before it has been accepted by the offeree.
- Must be communicated to the offeree.
- Can occur anytime before acceptance.
- A counteroffer acts as a new offer, which can also be revoked.
Memory trick: Remember, 'Offer' is like a question, 'Acceptance' is the 'yes', but 'Revocation' is the 'never mind'!