Question

Buyer A offers to purchase Seller B's house for $400,000. Seller B says he will not accept anything less than $450,000. Buyer A does not respond to the counteroffer one way or the other. After a few weeks go by with no other offers, Seller B contacts Buyer A again and says he will take the $400,000 offered. Which of the following is true?

Option 1: The offer was accepted, and there is a valid contract.
Option 2: The offer was rejected by Buyer A, and there is no contract.
Option 3: Seller B cannot change his mind after rejecting the offer.
Option 4: Buyer A must offer a higher price now.

Answer 1

There is no contract because Seller B's counteroffer served as a rejection of Buyer A's original offer, and Buyer A did not respond. Seller B can indeed change his mind and can make a new offer, which Buyer A would need to accept for a contract to be formed.

Step-by-step explanation:

When Buyer A offers $400,000 to purchase Seller B's house, and Seller B counters with $450,000, Buyer A's silence does not constitute rejection or acceptance of the counteroffer. In contract law, a counteroffer generally serves as a rejection of the original offer and proposes a new offer.

When Seller B later decides to accept Buyer A's original offer of $400,000, technically, the original offer was no longer in play after Seller B's counteroffer, and thus, there would need to be agreement on terms and a new acceptance to form a contract.

As such, Option 2 is closest to being correct; there is no contract because the original offer was constructively rejected by Seller B's counteroffer, and Buyer A never responded to it.

However, by indicating later that he will take $400,000, Seller B is essentially making a new offer to Buyer A. This new offer is identical to the original, but it must be accepted by Buyer A for a contract to be formed. Buyer A is not obligated to offer a higher price, and Seller B can change his mind after previously making a counteroffer.