How an offer dies: rejection, counter offer, revocation, lapse

Newport, Rhode Island, August of nineteen seventy five. A house is for sale. A buyer named Ardente bids two hundred and fifty thousand dollars, through the lawyers. The sellers' lawyer says the bid is acceptable, draws up a purchase and sale agreement, and sends it over for the buyer to sign. The buyer checks the title, signs it, and sends it back with a cheque for twenty thousand dollars.
With the signed agreement comes a letter from the buyer's lawyer, dated the eighth of September. Here is what it says. My clients are concerned that the following items remain with the real estate. The dining room set and tapestry wall covering in the dining room. Fireplace fixtures throughout. The sun parlor furniture. I would appreciate your confirming that these items are a part of the transaction, as they would be difficult to replace.
The sellers refuse to include the furniture. They do not sign. They send the agreement and the cheque back, and then they refuse to sell the house at all. The buyer sues for the house. So here is the question. He signed the sellers' own agreement and paid a deposit. Is there a contract? Think about it before I go on, because the answer turns on one letter about a dining room set.
The question I keep asking. What exactly did these people promise each other? The sellers offered a house on written terms. The buyer signed those terms and, in the same breath, asked for something more. Did he say yes, or did he say yes, if?
First line for the board. An offer creates a power of acceptance in the person it is made to. That power can be ended in five ways. The offeree rejects it. The offeree makes a counter offer. The offeror revokes it before acceptance. The time for acceptance runs out. Or one of them dies or loses capacity. Today is about the first four, and the line between the first two is where most of the marks are lost.
Second line.  A counter offer is a rejection plus a new offer.  If I offer to sell you my car for five thousand dollars and you say four thousand eight hundred, you have rejected my offer and made your own.  My offer is dead.  You cannot come back an hour later and accept it.
That was decided in England in eighteen forty, in a case about a farm, and the Supreme Court of the United States said the same thing in eighteen eighty six, about iron rails.
Here is the Supreme Court's statement of the rule. A proposal to accept, or an acceptance, upon terms varying from those offered, is a rejection of the offer, and puts an end to the negotiation, unless the party who made the original offer renews it, or assents to the modification suggested. The other party, having once rejected the offer, cannot afterwards revive it by tendering an acceptance of it.
The rails case is worth thirty seconds, because it shows the trap.  A mill offered a railway between two thousand and five thousand tons of iron rails on stated terms, to be accepted before the twentieth of December.  On the sixteenth the railway ordered twelve hundred tons on the same terms.  Twelve hundred is less than two thousand.  The mill declined.  On the nineteenth the railway tried to order two thousand tons, inside the deadline.  Too late.
The court said the order for twelve hundred was a rejection, and the offer was gone.
Third line, and this is the distinction that decides the Newport case. Not every question is a counter offer. A mere inquiry about different terms, made while keeping the offer open, is not a rejection. Would you consider including the tires, is an inquiry. I accept, provided the tires are included, is a counter offer. The difference is whether the acceptance is made to depend on the new term.
Now the case. Ardente against Horan, decided by the Supreme Court of Rhode Island in nineteen seventy six. The trial court had ruled that the letter of the eighth of September was a conditional acceptance, and therefore a counter offer, and that since the sellers never accepted it, no contract was formed. The buyer appealed.
The Supreme Court began with the rule. Here are its words. The acceptance may not impose additional conditions on the offer, nor may it add limitations. An acceptance which is equivocal or upon condition or with a limitation is a counter offer and requires acceptance by the original offeror before a contractual relationship can exist.
Then the court did the careful thing. It admitted that an acceptance can be valid despite conditional language, if the acceptance is clearly independent of the condition. So the question was whether this buyer had accepted the house and separately asked about the furniture, or had made his acceptance depend on getting the furniture. The court read the letter. It seeks confirmation that the listed items are a part of the transaction. That is not a separate inquiry. It ties the furniture to the deal.
The court affirmed. No contract. The buyer who had signed the sellers' own document, and paid twenty thousand dollars, had, in law, rejected their offer and made a new one, which they were free to decline. Read that letter again with the rule in mind. One sentence, asking for confirmation, cost him the house.
One more case, on revocation, because it shows the fourth way an offer dies. North Carolina, nineteen eighty. A buyer named Normile makes a written offer for a house with a deadline in it. Accepted on or before five o'clock the next afternoon. The seller does not accept. She makes a counter offer with changed terms, and the broker brings it to Normile that evening. Normile does not sign it. He thinks he has until five o'clock.
The next day, before five o'clock, another buyer signs an offer on the same terms, and the seller accepts it.  That afternoon the broker finds Normile and tells him, in the words the court records, you snooze, you lose, the property has been sold.  Normile then tries to accept the counter offer, before five.  The Supreme Court of North Carolina held that he was too late.
The deadline in his own offer did not carry into her counter offer as a promise to hold it open.  She was free to revoke, and when he learned the house was sold, her counter offer was revoked.
Put the three cases together. Rails. A varying acceptance is a rejection, and the offer cannot be revived. Newport. An acceptance that depends on a new term is a counter offer, however polite. North Carolina. An offer can be revoked any time before acceptance, and learning that the property has been sold is revocation enough.
Now let's change one fact. The Newport buyer's letter says, I accept. Would you consider leaving the dining room set? It would be difficult to replace. Is there a contract? Choose an answer before I go on.
Most people say no, because he still asked for the furniture. But look at the shape of the sentence. I accept, full stop. Then a question. The acceptance does not depend on the answer. That is the independent acceptance the Rhode Island court said would be valid, and a mere inquiry does not reject an offer. Contract for the house, and the furniture question is a separate negotiation.
Change one fact again. A buyer offers five thousand dollars for a car. The seller says, I'll think about it. The next morning the buyer says, I withdraw the offer. An hour later the seller says, I accept. Contract? Choose.
Most people say yes, because the seller accepted an offer that had a reasonable time to run. But the buyer withdrew first. Revocation before acceptance ends the offer, and I'll think about it was not an acceptance. It was not a rejection either, but that does not matter. The offer was alive until the buyer took it back, and the buyer took it back. No contract.
Change one fact a third time. Buyer offers five thousand. Seller says, four thousand eight hundred. Buyer says no. Seller says, fine, five thousand then. Contract? Choose.
Most people say yes, because they have landed on the buyer's own price. But trace the offers. The buyer offered five thousand. The seller's four thousand eight hundred rejected it and made a new offer. The buyer's no rejected that. The seller's fine, five thousand, is a third offer, which the buyer may accept or refuse. Nobody has accepted anything yet. The rails case, in a driveway.
Here is what people get wrong here, and why it is tempting.  The first mistake is treating any question as a rejection.  Inquiries are allowed, and the offer survives them.  The second mistake is the reverse, treating a polite condition as an inquiry.  Confirming that these items are part of the transaction sounded like a question.  It was a condition, and it killed the offer.  The third mistake is thinking that a deadline in an offer binds the offeror to hold it open.
It does not, unless the offeror gave something for that promise, which is the option contract, and it is the next module.
Here is the rule, in one breath. An offer dies by rejection, by a counter offer, which is a rejection with a new offer attached, by revocation communicated before acceptance, or by lapse of time, and an inquiry that keeps the offer open is none of those. Now, five questions.