AVOID COUNTEROFFER CONFUSION

by Scott Drucker on May 30, 2014

Counteroffer One. Counteroffer Two. Counteroffer Three. The fact is that multiple counteroffers can create confusion because, with each counteroffer, it becomes increasingly difficult to determine which terms have been agreed to and which proposals have been rejected. To help avoid counteroffer confusion, REALTORS® should consider integrating one of the following three techniques into their practice.

1. Rewrite the Purchase Contract

Try to avoid counteroffer confusion

Rather than submit yet another counteroffer, at some point the better practice is to simply draft and convey an entirely new purchase contract. From a legal perspective, the new purchase contract is akin to a counteroffer, which technically acts as the rejection of an offer and the submission of a new offer. But while the counteroffer and new purchase contract have the same legal effect, the use of a new contract enables the parties to efficiently view all terms in a stand-alone document.

2. All Inclusive Counteroffer

With multiple counteroffers, a prudent practice is for the final counteroffer to restate those terms from prior counteroffers by which the parties intend to be bound. For example, even if the parties have agreed via prior counteroffers that a specific appliance will convey, it may still prove beneficial for subsequent counteroffers to expressly address the disposition of that appliance. In the event that a subsequent counteroffer fails to mention the appliance, there may be uncertainty among the parties as to whether it transfers to the buyer. By expressly including all agreed upon terms in counteroffers three and higher, the parties are assured that they will obtain a stand-alone counteroffer that can be easily understood and implemented.

3. Incorporation By Reference

While not as favorable as either of the above suggestions, a third option is to incorporate by reference on the final counteroffer those portions of prior counteroffers that the parties still wish to implement. For example, the parties’ third counteroffer may state: “Expressly incorporated into this third counteroffer are lines seven through nine of Counteroffer One and lines 11 through 12 of Counteroffer Two.” Although verbiage of this nature requires the parties to review three documents to ascertain the agreed upon terms, there is no confusion as to the terms by which the parties intend to be bound.

While none of the aforementioned suggestions are legally required, they serve to clarify the terms of the parties’ agreement, which hopefully eliminates the sort of confusion that often leads to contract disputes.

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Phoenix Association of REALTORS® » Avoid Counter Offer Confusion
June 28, 2014 at 3:37 pm

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