Counteroffer: Overview, definition and example
What is a counteroffer?
A counteroffer happens when one party responds to an offer made by another party by changing the terms of the original offer. Instead of accepting the offer as it is, the person making the counteroffer proposes new terms, which effectively cancels the original offer. A counteroffer is treated as a new offer that the original offeror can either accept, reject, or make their own counteroffer.
Why is a counteroffer important?
A counteroffer is important because it allows parties to negotiate terms that are more favorable to them. It keeps the negotiation process going and gives both parties the chance to adjust the terms of an agreement until they reach a mutually acceptable deal. It also clarifies what terms are agreeable to each party, avoiding misunderstandings.
Understanding counteroffer through an example
Imagine a company offers to sell equipment to another company for $50,000. The buyer, however, believes the price is too high and counteroffers with a price of $45,000. This counteroffer cancels the original offer of $50,000. Now, the seller has the option to accept, reject, or propose another counteroffer.
In another case, if an employee receives a job offer with a salary of $60,000 and instead proposes $65,000, that’s a counteroffer. The employer must then decide whether to accept, reject, or negotiate further.
Example of a counteroffer clause
Here’s how a counteroffer clause might look in a contract:
“Any response to this offer that changes the terms of the original offer shall be considered a counteroffer and not an acceptance of the original offer.”
Conclusion
A counteroffer is a key part of negotiation, allowing one party to propose new terms in response to an initial offer. It keeps the conversation going and provides flexibility in contract discussions. Understanding counteroffers ensures that both parties are clear about what is being proposed and agreed upon.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.