Question

Legal Principle:With the counter offer the original offer lapses.

Factual Situation: A, offers to sell his house to B for Rs.5 lakhs (must be given in cash). B says,'I accept your offer.Here is Rs.2 lakhs in cash and three month promissory note for the balance.
Issue: Is there any contract between A and B.

• A. No, there is no contract between A and B because acceptance is conditional.
• B. Yes, there is contract,payment of Rs. 2 lakhs amounts to the performance of contract and hence contract is valid.
• C. The contract is voidable at the option of A.
• D. None of these.

Answer 1

The correct option is A No, there is no contract between A and B because acceptance is conditional.

Counter offer is offer given in response to an offer. It implies rejection of the original offer and puts the ball back in the court of the original offerer who has three options:

(1) accept it, expressly (by replying) or by implication (by not replying),

(2) issue another (counter-counter) offer, or

(3) reject it expressly.

No binding contract can be created until one party accepts the other's offer.

In this case, there is no contract between A and B since the offer made by B may or may not be accepted by A.