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When Parties Issue Counteroffers

A Florida court recently considered whether a prospective buyer could choose to accept a seller’s counteroffer, even after that prospective buyer had countered the seller’s counteroffer.

When Parties Issue Counteroffers
Does rejecting a seller’s counteroffer really terminate the buyer’s ability to accept an earlier counteroffer? Yes, according to the case of Polk vs. BHRGU Avon Properties LLC, 31 FLW 3110 (2006).

Theresa Polk (“Polk”) listed a residence and 181 acres of land in Polk County for sale with a real estate broker. On Jan. 24, 2005, BHRGU Avon Properties LLC (“Avon”) made an offer to buy the property. Polk responded with two counteroffers. The first counteroffer was made on Feb. 2, followed by a second one the next day, giving Avon until 5 p.m. on Feb. 7, 2005, to accept them.

On Feb. 4, Avon made another offer altering the terms of Polk’s counteroffers. Polk never responded to this counter-counteroffer. So, prior to the Feb. 7 deadline, Avon signed the original counteroffers and returned them to Polk along with a $25,000 deposit. Polk’s attorney accepted the check but never cashed it and eventually wrote “VOID” on it.

Avon Files Suit
When Polk refused to perform the alleged purchase contracts, Avon filed a lawsuit seeking specific performance. The trial court ruled in favor of Avon,finding that Polk’s Feb. 2 and 3 counteroffers constituted option contracts that were irrevocable provided Avon accepted their terms before the Feb. 7 deadline (which Avon had done) and that Avon’s Feb. 4 counter-counteroffer didn’t terminate its ability to accept the original counteroffers. Polk subsequently filed an appeal.

On appeal, the 2nd District Court of Appeal (DCA) reversed the trial court and ruled in favor of Polk. In doing so, the DCA first considered whether Polk’s Feb. 2 and 3 counteroffers constituted enforceable option contracts noting that an option contract which isn’t supported by consideration is merely an offer and not a contract.

The trial court had found that Avon’s $25,000 deposit check constituted consideration, but the DCA rejected this ruling. It indicated that an option to purchase real property involves two contracts: the option contract and the real estate sales contract. Here, the DCA concluded that the funds were consideration for the purchase contract, not consideration in support of an option to purchase. Thus, the DCA held that the counteroffers were simply offers and not enforceable option contracts.

What is a Counteroffer?
A counteroffer is a rejection of the original offer, said the DCA. Because Avon had made a counteroffer to Polk’s original counteroffers, doing so terminated its ability to accept Polk’s counteroffers. Polk had no obligation to accept Avon’s attempt to accept the counteroffers after it had rejected them. Because Polk didn’t “manifest any intent” to accept Avon’s counter-counteroffers, the trial court shouldn’t have ordered specific performance in favor of Avon. Thus, the court reversed the trial court in favor of Polk.