Contracts and Sales Multistate Bar Practice Exam

How does a counteroffer affect the original offer?

1. It extends the time of the original offer

2. It replaces the original offer and creates a new offer

3. It leaves the original offer unchanged

4. It confirms the acceptance of the original offer

The correct answer is: It replaces the original offer and creates a new offer

A counteroffer fundamentally alters the dynamic between the original parties involved in the negotiation. When a counteroffer is made, it effectively replaces the original offer, introducing new terms for consideration. This action signifies that the party making the counteroffer is not willing to accept the initial terms and is instead proposing an alternative. This mechanism is crucial in contract law, as it illustrates the principle that an offer must be accepted as it stands; any modifications suggest a new willingness to negotiate rather than accept the existing terms. The original offer is effectively rendered void, as the original offeree is no longer in a position to accept it. Instead, the parties must now negotiate the newly proposed terms and come to a new agreement if they desire to form a binding contract. In contrast, other answers do not accurately represent the functionality of a counteroffer. For instance, extending the time of the original offer or leaving it unchanged does not occur with a counteroffer, nor does it confirm acceptance of the original. The significant outcome of a counteroffer remains its power to replace the original offer entirely, making it a foundational concept in contract negotiation and formation.