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A contract is entered into with the proposal of an offer and acceptance of it. An offer when accepted becomes a legally binding contract. One who makes the offer is an offeror and the person to whom an offer is made is an offeree.
In order to become a legally binding contract, the conditions of acceptance must be the same as the conditions stipulated in the offer. If the conditions vary, it will not be a valid acceptance, but will be deemed as a counter offer or a counter proposal.
A counter offer is an offer made by an offeree in return for an original offer during negotiations for a final contract. It is a fresh offer made in reply to an initial offer. A counter offer is made by rejecting a prior offer and it automatically discards the earlier offer, rendering it void. A counter offer initiates another contract and requires acceptance under the terms of the counter offer. If not, there is no valid contract. Here's a counter offer example: 'X' makes an offer of $175,000 for his house to be paid in 45 days and 'Y' replies with a counter offer of $160,000, payable in 60 days. Y's counter offer is the new offer and it is upon X to accept it or not.
In order to constitute a valid contract, an acceptance of the terms of the counter offer must be made by the original offeror. Making a counteroffer voids the initial offer and terminates legal responsibility of the offeror to honor it. A counteroffer amends the original offer, making it more attractive to the original offeree or the person making the counter offer.
In a real estate transaction, an agreement or contract of sale is generally made after a series of negotiations i.e., after innumerable offers and counter offers put forth by all the parties. Acting in response to a counteroffer or counterproposal permits a person to refuse an earlier offer, and allows negotiations to persist. A real estate counter offer letter has the effect of rejecting earlier offer to purchase contracts.
In any transaction, the number of counter offers can be unlimited. For instance, in a home buying process, a home seller and a buyer can generate any number of counter offers after the buyer submits the offer to purchase. An initial counter offer can specify that the home seller has accepted the buyer's offer subject to certain conditions. In return, the buyer can counter the home seller's counter offer and it will be the second counter offer. Depending on state laws, the parties can generate any number of counter offers. However, like purchase offers, counter offers are also time bound. When a buyer delays signing a counter offer, a seller can reject the counter offer and accept a different offer.