What is Counter Offer?
A counteroffer changes the terms of a previous offer in some way. This means that the original offer has been rejected. The party that made the original offer can accept the counteroffer, but they are under no obligation to do so. A binding contract is only formed if the counteroffer is accepted.
There are several industries and contexts where counteroffers are common, such as buying and selling property, employment contracts, subcontracting, and insurance settlements.
Case Examples
- Sale of businesses: In Venture Assocs. Corp. v. Zenith Data Sys. Corp., 987 F.2d 429, 432 (7th Cir. 1993), two businesses were attempting to sell a subsidiary. However, Venture, as the buyer, made changes to the proposed sales agreement that constituted a counteroffer: it changed the terms of the proposed agreement, and the defendant never accepted the new terms.
- Insurance Settlements: When you attempt to get a settlement from an insurance company, any attempt by you to change the terms of the settlement offer from the company creates a counteroffer, which the insurance company can either accept or reject. See Cavallini v. State Farm Mut. Auto Ins. Co., 44 F.3d 256, 266 (5th Cir. 1995).
- Subcontracting: In subcontracting, a prime contractor issues a call for bids to which potential subcontractors respond with their bids. A bid does not constitute a binding contract because the contractor can still reject or accept the bids even if they have worked with the subcontractor previously. See Johnson Enters. of Jacksonville, Inc. v. FPL Grp., Inc., 162 F.3d 1290, 1312 (11th Cir. 1998).
Questions to Consider
- Did a party charge the terms of an offer?
- Did the other party accept it?
Further Reading
For more detailed information, see our related Contracts terms:
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