In Alabama, a buyer makes an offer on a property and the seller responds with a counteroffer changing the purchase price and closing date. Before the buyer accepts the counteroffer, the seller calls the listing agent and says the original offer is accepted instead. Which of the following correctly describes the legal status of the transaction?
Correct Answer
B) The seller's counteroffer terminated the original offer, so no binding contract exists until the buyer accepts the counteroffer
Under Alabama contract law, a counteroffer operates as a rejection of the original offer and simultaneously creates a new offer. Once the seller issued the counteroffer, the original offer was legally terminated. The seller cannot subsequently 'accept' the original offer because it no longer exists. No binding contract exists until the buyer accepts the counteroffer (or makes another offer).
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Related Topics & Key Terms
Key Terms:
Related Concepts
A financing contingency makes the purchase contract conditional upon the buyer obtaining mortgage approval within a specified time period. If the buyer cannot secure financing, they can cancel the contract and receive their earnest money back.
An inspection contingency gives the buyer the right to have the property professionally inspected within a specified time frame and to negotiate repairs or cancel the contract based on the findings.
Liquidated damages are a predetermined amount of money specified in the contract that the non-breaching party is entitled to receive if the other party breaches. In real estate, the earnest money deposit typically serves as liquidated damages.
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