Understanding Counter-Offers in Contract Law

What is the effect of B sending a cheque for £140 in response to A's offer to sell goods for £150?

• A. It constitutes acceptance of A's offer.
• B. It causes A's offer to lapse.
• C. It frustrates A's offer.
• D. It constitutes a counter-offer, thereby destroying A's offer.

Answer: (D)

When B sends a cheque for £140 in response to A's offer to sell goods for £150, it constitutes a counter-offer. This action indicates that B is not accepting the original terms of A's offer, but rather proposing a new term—that is, the price of £140 instead of the original £150. Consequently, by making a counter-offer, B effectively rejects A's proposal and terminates A's original offer. In contract law, it's essential to recognize that an acceptance must mirror the terms of the original offer to create a binding agreement. Since B's response alters the price, A's offer is no longer available for acceptance as is. The interaction demonstrates the principle that a counter-offer cannot merely accept the initial terms but instead suggests new ones, thereby nullifying A's original offer. Thus, B's cheque does not lead to a direct acceptance; it instead signifies a negotiation shift and the creation of a potential new offer from B to A regarding the goods at the reduced price.

When we talk about contract law, understanding the fine line between a counter-offer and acceptance can be a real game changer. Take a moment and consider this scenario: A offers to sell goods for £150, and then B, in response, sends a cheque for £140. What do you think happens next? You might think it’s a simple transaction, but in legal terms, it gets a little deeper—it’s a classic case of counter-offer.

So, let's break it down a bit. When B sends that cheque, he's not just saying, “Sure, I’ll take the goods at £150.” Instead, he's essentially saying, “I’d like to buy the goods, but only if you accept my price of £140.” This shift fundamentally changes the game. It’s like walking into your favorite restaurant and saying, “I’ll eat here—but only if you drop the price on that burger.” You see where I’m going with this, right?

Now, let's dig into the law part, which is crucial. Acceptance in contract law requires that both parties agree to the exact same terms for a binding agreement to form. B's cheque, altering the price, communicates a new proposition—rather than accepting A’s offer, it effectively rejects it. So, if you’re thinking A can still proceed with his offer, think again!

You might wonder, what happens to A's offer now? Well, since B proposed a different price, A's original offer is no longer active. This scenario exemplifies a fundamental principle in contract law: a counter-offer nullifies the original offer. Basically, by sending that cheque for £140, B opens a new chapter in this negotiation that no longer includes A’s initial terms.

It's fascinating, right? It also highlights the importance of clarity in negotiations. Whether you are entering a business agreement or simply buying a car, being explicitly clear about terms is vital. Every offer must be approached with the mindset that any deviation can shift the negotiation landscape. So, next time you find yourself drafting an offer or responding to one, remember B's cheque for £140 might just redefine the entire dialogue.

As a wise friend said once, “It’s not just about making the right offer; it’s about knowing how to respond to offers, too!” This interplay makes all the difference in the world of contracts. By grasping these principles, you’ll be better prepared for your ACCA Corporate and Business Law (F4) certification exam, and in the business world, you’ll navigate negotiations with confidence!

In conclusion, the interaction between A and B reflects critical elements of contract law and reinforces the idea that negotiations are dynamic. They’re not just about agreeing to terms but also understanding how changes can reshape agreements. Got those concepts locked down? Great! Now you’re one step closer to mastering the art of contract negotiations!