Special offer

Counteroffer Is a Rejection of Earlier Offer

By
Real Estate Broker/Owner with Highland Realty, Inc 0225 099336

 Counteroffer Is a Rejection of Earlier Offer

A Florida court has considered whether a prospective buyer could choose to accept a seller’s counter offer to the prospective buyer, even after the prospective buyer had countered the seller’s counter offer.

Theresa Polk (“Seller”) listed 181 acres of land for sale with a real estate broker. BHRGU Avon Properties, LLC (“Prospective Buyer”) made an offer to purchase the property on January 24, 2005. The Seller made two counteroffers (“Counteroffers”) on February 2 & 3, 2005, giving the Prospective Buyer until 5PM on February 7, 2005 to accept the offers.

On February 4th, the Prospective Buyer made offers altering the terms of the Counteroffers. The Seller never responded to these counter-counteroffers. Prior to the February 7th deadline, the Prospective Buyer signed the Counteroffers and returned them to the Seller along with a $25,000 deposit. The Seller accepted the check but never cashed it and eventually wrote “VOID” across the front.

When the Seller refused to perform the alleged purchase contract, the Prospective Buyer filed a lawsuit seeking specific performance of the contract. The trial court ruled in favor of the Prospective Buyer, finding that the Counteroffers constituted option contracts and the Prospective Buyer’s counter-counteroffer did not terminate the Prospective Buyer’s ability to accept the counteroffers. The trial court ordered the parties to determine which of the Counteroffers constituted the purchase agreement. The Seller appealed.

The District Court of Appeal of Florida, Second District, reversed the trial court and ruled in favor of the Seller. The court first considered whether the Counteroffers constituted enforceable option contracts. An option contract must have two elements: first, an underlying contract which is not binding until accepted; and second, an agreement to hold the agreement open until the other party has an opportunity to accept. The option must also be supported by consideration. If the “option” is not supported by consideration, then it is merely an offer and not a contract.

Since the Counteroffers were not supported by consideration, the court ruled that the Counteroffers were not option contracts. The trial court had found that the Prospective Buyer’s $25,000 deposit check constituted consideration, but the appellate court rejected this ruling. The $25,000 deposit was consideration for the purchase contract, not consideration in support of an option to purchase. Option contracts are separate contracts, and so require their own consideration. Thus, the Counteroffers were simply offers because they were not supported by consideration and not binding option contracts.

The court also stated that a counteroffer constitutes a rejection of the original offer. Because the Prospective Buyer had made a counteroffer to the Counteroffers, it had rejected the Counteroffers and terminated its ability to accept the Counteroffers. The Seller had no obligation to accept the Prospective Buyer’s attempt to accept the Counteroffers after it had rejected them. Because the Seller did not manifest any intent to accept the Buyer’s counter-counteroffers, the trial court should not have ordered specific performance in favor of the Prospective Buyer. Thus, the court reversed the trial court and ordered that the trial court to enter a ruling in favor of the Seller.

Polk v. BHRGU Avon Properties, LLC, No. 2D06-2426, 2006 WL 3615166 (Fla. Dist. Ct. App. Dec. 13, 2006).

In the future, I will be interested to see if rejecting a counteroffer really terminates the seller's or buyer's ability to accept an earlier counteroffer. It happens. People change their minds. What do you think? 

 

 

Comments (33)

Christy Powers
Keller Williams Coastal Area Partners - Pooler, GA
Pooler, Savannah Real Estate Agent
I think it ended the way it should have. They didn't like the counter offers from the seller and altered them.
Mar 06, 2007 01:10 PM
Larry Estabrooks
Independent Real Estate Agent - Moncton, NB
100% representation means NEVER DUAL AGENCY !

I think people will go to court over anything.

Rejecting an offer is rejecting an offer, counter or otherwise, once notice of the rejection has been conveyed to the other party.

Mar 06, 2007 01:44 PM
Sean Carroll
The Get Off Your A$$ Academy - Manhattan, NY
Real Estate Speaker and "Expert" Coach
Even with getting everything in writing, stories like this make me scratch my head sometimes about what is real and what isnt a real offer. Well written post though. Thanks!
Mar 06, 2007 02:03 PM
Edite Liepina-Lawrence
ERA Tradewind Real Estate - Longmont, CO
The title already says everything, no questions there!
Mar 06, 2007 02:40 PM
Wayne B. Pruner
Oregon First - Tigard, OR
Tigard Oregon Homes for Sale, Realtor, GRI

Everything I've always heard and practiced is a counter-offer is a rejection of an offer. Why would a trial court see things differently? Then the appellate court overrules the trial court. It seems such a basic concept would be the same throughout our legal system.

Mar 06, 2007 03:32 PM
Kaushik Sirkar
Call Realty, Inc. - Chandler, AZ
Interesting - do we consider it a rejection, or an addendum?  Seems both could apply....
Mar 06, 2007 04:45 PM
Ava Anderson
A-Z Atlanta Realty - Snellville, GA
Selling Atlanta from A-Z!
I normally make a new offer if something changes, but was told I should not do this way.  I am in agreement with the decision.  The seller did not agree to the new offer submitted.
Mar 06, 2007 05:25 PM
Randy L. Prothero
eXp Realty - Hollister, MO
Missouri REALTOR, (808) 384-5645
I had a variation of this happen when I tried to purchase a property in Arizona many years ago.  The seller countered me for something very minor.  I rejected it and bought another place that I found during the countering stage.  His lawyer threatened to sue if I did not go through with the sale.  I reminded him that the counter was a rejection of my offer.  That was the last I heard of it.
Mar 06, 2007 05:37 PM
Mitchell Jamel
Brite Real Estate Professionals - Saint Augustine Florida - Saint Augustine, FL
e-PRO Realtor

Interesting Read, thanks for the Post

Mar 06, 2007 08:14 PM
Lucky Lang
Premiere Plus Realty Marco Island - Marco Island, FL
Marco Island & Naples Florida Real Estate

Dave,

At first I thought I was reading Abbott & Costello's "Who on first...what's on second routine".  I finally followed the yellow brick road to it's conclusion. 

The District Court of Appeal of Florida, Second District, in my opinion, made the better decision.  If you change one thing, it is a rejection of the offer and a new counter-offer.  K.I.S.S. seems to come to my mind.  It's too bad the trial court wasted a lot of people's time and money.  Good thing the Seller appealed!

Thanks for the mind-tickling discussion,

Lucky :)

Mar 06, 2007 09:35 PM
Mitchell J Hall
Manhattan, NY
Lic Associate RE Broker - Manhattan & Brooklyn
In NY offers, counter offers, accepted offers are only negotiations. Neither party has any legal obligation to the other party until a fully executed contract is signed by both buyer and seller.
Mar 06, 2007 11:04 PM
Christina Ethridge
The North Idaho Dream Team powered by SKE Realty Group - Coeur d'Alene, ID

This is sort of a DUH - I can't believe the buyers even thought they could force the seller's hand - and shame on the trial court!

Our counter offers specifically state that this counter offer supercedes all previous counter offers.  In fact, you can't even make 1 change from a previous counter and say all other terms remain (and mean the previous counter).     

Mar 06, 2007 11:45 PM
Michael Roberts
Real Estate Professionals of Glynn - Saint Simons Island, GA
The court obviously has some common sense.  The counter offer is a new contract with elements carried forward off the original but it is NEW.
Mar 07, 2007 01:18 AM
David A. Podgursky PA
THE PODGURSKY GROUP @ Re/Max Direct - Boynton Beach, FL
THE PODGURSKY GROUP - Make the Right Move!

I remember writing my first counter... our legal team specifically had us write out a rejection of the first offer and a new offer even if all contingencies were to remain the same...

I guess they were playing the CYA game

Mar 07, 2007 01:55 AM
Roger Stensland
Keller Williams Realty Puget Sound - Maple Valley, WA
Let's Move!
I had to use a score card to keep up!  I'm glad that the appeals court judge overruled the trial judge's opinion.  At least that is how I understand the law up here.
Mar 07, 2007 02:08 AM
George W. Miller
Keller Williams Realty - Naugatuck, CT
Naugatuck and Beacon Falls Real Estate
This final disposition seems to line up with my understanding from my Real Estate training. Whenever a buyer counters, it cancels the original offer. The decision seems correct to me.
Mar 07, 2007 03:05 AM
Kelli Fronabarger
Bend River Realty Inc. - Bend, OR
Realtor - Bend Oregon
Years ago, I thought about pursuing a "LAW" degree. Thanks for reminding me of why I'm in Real Estate and not an Attorney. Great post : )
Mar 07, 2007 07:46 AM
Margaret"PEGGY" Seme
Blue Realty GMAC - Phillipsburg, NJ
GRI,CRS,ABR

I was always taught that a counter offer was a new offer with whatever terms weren't changed remaining the same as in the orginal offer----In GA the only change to that was with the inspection negotiations--the buyer could ask for all and the seller couold offer and they could go back and forth for a set number of days and either could go back to a prior offer--but as to price before one was accepted NO WAY

The courts did the right thing in my eyes--if the seller had cashed the check it would have been a different story--that would have deemed it as accepted

Mar 07, 2007 08:48 AM
Anonymous
Dan
Very well written. It is very clear that a counter offer is just that an offer until both parties agree to it's contents. If there is any other counter made the first is no longer available because it has been countered rendering it a void contract. I personally think it is pretty easy to understand and in my state it was a question on my broker exam.
Mar 07, 2007 12:12 PM
#32
D B
Quakertown, PA
e-PRO, Realtor - Bucks County PA - 610-952-3578
i enjoyed reading this blog.   Thanks for posting it
Oct 23, 2007 01:07 AM