David, a licensed New Jersey salesperson, is representing the seller in a transaction. The buyer's attorney sends over a purchase agreement that contains a clause the seller finds objectionable. The seller crosses out the clause, initials the change, and signs the agreement. The buyer has not yet responded. Which of the following best describes the legal status of this transaction under New Jersey contract law?
Correct Answer
B) A counteroffer has been made, which constitutes a rejection of the original offer
Under New Jersey contract law, when a party makes any material change to an offer before signing — such as crossing out a clause — this constitutes a counteroffer, which legally operates as a rejection of the original offer and the creation of a new offer. The buyer is now the offeree and must accept, reject, or counter the seller's modified version. No binding contract exists until the buyer accepts the counteroffer.
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Related Topics & Key Terms
Key Terms:
Related Concepts
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.
A breach of contract occurs when one party fails to perform their obligations under the contract without a legal excuse. The non-breaching party is entitled to legal remedies including damages, specific performance, or contract rescission.
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- → A Rhode Island licensee encounters a listing contract is drafted. What should the licensee remember?
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