Priya makes an offer to purchase a home in Kailua-Kona for $850,000. The seller counters at $875,000. Priya then counters back at $860,000. Before the seller can respond to Priya's counter, the seller calls Priya's agent and verbally accepts the original offer of $850,000. Which of the following best describes the legal status of this transaction?
Correct Answer
C) No binding contract exists because Priya's counter-offer at $860,000 terminated the seller's counter at $875,000
Under contract law as applied in Hawaii, a counter-offer operates as a rejection of the prior offer and substitutes a new offer. When Priya counter-offered at $860,000, she rejected the seller's counter at $875,000. The seller's original counter at $875,000 is no longer available for acceptance. The seller's verbal acceptance of the original $850,000 offer is ineffective because that offer was extinguished by the chain of counter-offers. No binding contract exists at this point.
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Related Topics & Key Terms
Key Terms:
Related Concepts
An appraisal contingency allows the buyer to cancel or renegotiate the contract if the property's appraised value comes in lower than the agreed-upon purchase price. This contingency protects buyers from overpaying.
An assignment of contract transfers one party's rights and obligations under a contract to a third party called the assignee. The original party, known as the assignor, transfers their contractual position to someone who was not originally part of the agreement.
A bilateral contract is an agreement in which both parties exchange promises and are both obligated to perform, while a unilateral contract is one in which only one party makes a promise and the other party is not obligated to act.
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