ProfessorMelissa A. Hale
CaseCast™ – "What you need to know"
Brief Fact Summary. Plaintiffs Normile and Segal both attempted to purchase a piece of real estate from Defendant Miller. Normile first submitted a bid, but Plaintiff responded with a counteroffer. Prior to Normile’s acceptance of Defendant’s counteroffer, Defendant sold the property to Segal.
Synopsis of Rule of Law. A counteroffer acts as a rejection of the original offer and does not contain the terms of the original offer. The counteroffer, like the original offer, must be accepted before it is revoked.
Whether a contract has been made must be determined from the expressed intention of the parties from a consideration of their words and acts the test of the true interpretation of an offer or acceptance is not what the party making it thought it meant or intended it to mean, but what a reasonable person in the position of the parties would have thought it meant.View Full Point of Law
Issue. Is there an enforceable contract to purchase the property between Normile and Defendant?
Was the counteroffer a rejection of the original offer?
Did the deadline for acceptance become part of the counteroffer?
Was the counteroffer an option?
Did Plaintiff accept the counteroffer?
Held. No. There is not an enforceable contract between Normile and Defendant to purchase the property
When a potential purchaser submits an offer to the seller and the seller makes changes to the offer prior to signing, it is generally referred to as “qualified or conditional acceptance.” The type of acceptance is a counteroffer and functions as a rejection of the original offer submitted by the potential purchaser. In the present case, because Defendant changed terms of Normile’s offer, Defendant did not accept Normile’s offer. In fact, Defendant’s counteroffer actually operated as a rejection of Normile’s offer.
In the present case, the deadline for acceptance provision in Normile’s offer did not become part of Defendant’s counteroffer. The Court reasons that because Defendant at no point unconditionally assented to the terms of Normile’s offer, the terms of Normile’s offer did not become part of the counteroffer.
An option contract is one that grants a potential purchaser an exclusive right to purchase property within a specified period of time for a fixed price. The Court provides two reasons why Defendant’s counteroffer does not grant Normile an option contract. First, an option contract must be supported by valuable consideration. In the present case, no consideration was given. Second, Defendant’s counteroffer did not promise that the offer would remain open for a specific amount of time.
A potential purchaser does not have the power to accept an offer after it has been revoked. Under these facts, Normile neither accepted nor rejected the counteroffer when it was first presented. Normile instead expressed concern regarding some of the terms of the counteroffer and indicated that he was going to wait to decide whether to accept the counteroffer. When Defendant entered into a contract with Segal, Defendant manifested an intention to revoke the counteroffer. Revocation generally must be communicated to the offeree to be effective. In the present case, Normile did receive notice of the revocation through the real estate broker. Because Normile’s power of acceptance had already been terminated by Defendant’s revocation of the counteroffer, Normile’s attempt to accept the counteroffer failed.
Discussion. In this case, Defendant rejected Normile’s offer by submitting a counteroffer. Because the counteroffer operated as a rejection of Normile’s original offer, the terms of Normile’s original offer were not transferred to the counteroffer. Normile did not have a contract to purchase the property from Defendant because Normile failed to accept the counteroffer before it was revoked.