What is a 'Counteroffer'

A counteroffer is a proposal that is made as a result of an undesirable offer. A counteroffer revises the initial offer and makes it more desirable for the person making the new offer. This type of offer permits a person to decline a previous offer and allows offer negotiations to continue.

BREAKING DOWN 'Counteroffer'

An offer that provides new terms or conditions becomes a counteroffer. However, the offer may limit, change, or add some or all the terms of the original offer. There is no obligation of either party until they agree on a contract, which occurs once the counteroffer is accepted. Once the buyer or offeree accepts a counteroffer, a binding contract is formed, which is enforceable against the seller or offeror. A counteroffer is a reply to an original offer, which is greater or less than the original price. This type of offer voids a previous offer and the entity, which presented that offer, is no longer legally responsible for it.

A counteroffer is conditional. When the seller receives a low offer, the offeree can counter with a price, which he feels is reasonable. The buyer can either accept that offer or counter again. The seller can counter the offer; however, the offeree does not have to accept it.

For example, a seller wants to sell a vehicle for $20,000. A buyer arrives and offers $15,000 for the vehicle. The offeror provides a counteroffer asking for $16,000 with the objective of obtaining a higher price. If the offeree declines, the offeror cannot force the buyer to purchase the vehicle at $15,000, even though the buyer suggested that price.

Negotiating

There are several forms of a counteroffer, including a seller’s acknowledgment of an order that provides estimated delivery dates, such as when placing an order online. The buyer has three options when responding to a counteroffer: accept it, reject it or present another counteroffer. If the buyer rejects the offer but changes his mind and wants to accept the offer, the offeror cannot accept the offer. The offeree must present a new counteroffer.

A counteroffer may include explanations of the terms of the offer or requests for supplementary information. Finalizing counteroffer negotiations requires the buyer and offeror to accept the terms without any additional conditions or modifications.

There is no limit to the number of times an offeree and offeror can counter each other during negotiations. When countering back and forth, each offer should present a price, which is less than the previous offer. This conveys to the seller that the buyer is nearing his final offer.

While reviewing the offer, take into consideration that there are several factors besides price that could be undesirable. When considering making a counteroffer, never let emotions affect negotiations. Do not be afraid to ask questions, do research or ask for additional time to consider the new offer.

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