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Counteroffer

Reviewed by Apoorva | Updated on Oct 05, 2020

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What is Counteroffer?

A counteroffer refers to the response given to an initial offer, making it obvious that the original offer was rejected. It gives three options to the original offer—accept the counteroffer, reject the counteroffer, or make another offer.

A binding contract does not exist between the parties until a party involved accepts the other's offer. Such offers are typically seen in business negotiations, transactions, and private deals. Employment negotiations, real estate deals, and car sales are common examples of the counteroffer.

What You Should Know About Counteroffers

When two parties are negotiating a transaction, one party puts an offer on the table. The other party may respond with a different offer as a reply to it by changing the terms of the deal along with the price. This is called a counteroffer. The price, here, can be greater or lesser than the original offer based on the party. If the person who made the initial offer rejects it, he may renegotiate it with another counteroffer.

There can be numerous counteroffers made by each party involved in the deal. When countering, each offer should go back and forth towards the initial offer made, so the seller thinks that the buyer is going to make it favourable for him.

There is no compulsion for any party to agree on a contract until a counteroffer is accepted. Upon accepting, a contract is created, which can be enforced against both the parties. Once a counteroffer is accepted, any previous offers are voided, and the entity involved in that offer is no more legally responsible for it.

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