Dispute

Plaintiff conveyed an offer of purchase of real property to a defendant-seller which contained a time limit for acceptance. Defendant-seller modified the terms of the offer and signed it, then returned it for acceptance by plaintiff. Plaintiff neither accepted nor rejected. Thereafter, defendant seller entered a contract with a third party (who was later joined as another plaintiff) for the sale of the property. After learning of this sale, but before the time limit conveyed in plaintiff’s original offer, plaintiff executed defendant’s counteroffer and made an earnest deposit.

Both the initial plaintiff-offeror and the third-party plaintiff sued for specific performance. Trial court granted the third-party plaintiff’s motion for summary judgment and specific performance of that third-party contract. Initial plaintiff-offeror appealed and it was affirmed, and that affirmation was appealed on petition.

Rules of law

• An offer may contain a time limit, which causes that offer to automatically revoke upon expiration. The offeror is the creator of the offer and any such limit.
• An option is a separate contract, supported by consideration, in which an independent offer is guaranteed to remain open and exclusive for a certain period.
• A conditional or modified acceptance is a rejection of the initial offer and creates a counteroffer.

Arguments

Plaintiff argued that the counteroffer had left the property “off the market” until the time specified in the original offer, in essence creating an option on the property. Both defendant seller and the third-party plaintiff argued that the counteroffer revoked the original offer, with its time limit, and represented a new offer which was revocable; they argued this new offer was revoked when the new contract was entered and the plaintiff was notified of the same.

Conclusion

The court modified and affirmed the decision of the Court of Appeals, holding for the defendant and third-party plaintiff. They found that the time limit in the original offer did not carry over into the counteroffer conveyed by the conditional acceptance, and that no option existed because the defendant had never intended to convey an option (and no consideration existed to support such a contract). Thus, the plaintiff’s attempts to accept the counteroffer after learning of the actual sale was fruitless, as their power of acceptance had already been revoked.