A counter offer is a response given to an initial offer. A counteroffer means the original offer was rejected and replaced with another one. The counter offer gives the original offeror three options: accept the counter offer, reject it, or make another offer.
An acceptance must correspond with the terms of the offer. Any qualification or amendment of the offer will constitute a counter-offer which destroys (cancels) the original offer.
The purported acceptance thus becomes a fresh offer which is open to the original offeror, now the offeree, to accept or reject.
This event and its legal consequence were given elaborate consideration by Tobi, J.C.A., in the Orient Bank case as follows:
“…in other to constitute an acceptance, the assent to the terms of an offer must be absolute and unqualified. If the acceptance is conditional, or any fresh term is introduced by the person to whom the offer is made, his expression of assent amounts to a counter-offer which in turn requires to be accepted by the person who made the original offer. For an acceptance to be operative, it must be plain, unequivocal, unconditional and without variance of any sort between it and the offer. The offeree must unreservedly assent to the exact terms proposed by the offeror. A counter-offer or a qualified acceptance of an offer cannot give rise to a binding agreement between parties…”
Thus, in Hyde V. Wrench,
The facts of the case were as follow:..
The defendant on June 6 made an offer to sell an estate to the plaintiff for £1,000. On June 8, the plaintiff replied with an offer to buy the estate for £950. This was rejected by the defendant on June 27. On June 29, the plaintiff purported to accept the defendant’s original offer of the estate for £1,000. This was rejected by the defendant and the plaintiff brought an action for specific performance.
It was held that the original offer was no longer open to the plaintiff to accept. By “accepting” to buy estate for £950 instead of the £1,000 for which it was offered, the plaintiff rejected the original offer and was in effect making a counter-offer/ therefore, there was no obligation whatsoever between the parties.
The distinction between a true acceptance and a counter-offer was thoroughly analyzed by Kolawole, J.C.A., at the Court of Appeal in Major – General George Innih (RTD) & Ors. V. Ferudo Agro & Consortium Ltd.
Facts of the case were as follows:
The first appellant was the chairman of Assets disposal Commission of a Federal Government-owned Company called the Nigerian Palm Produce Board. He wrote a letter to the respondents company offering to sell off the assets of the palm produce board to the respondent for ₦3, 550, 000.00 (-three million, five hundred and fifty thousand naira) provided payments was made within the next three days. The respondent thanked the offeror for the offer and requested the period of payment to be extended to three weeks.
The appellants immediately sold the assets to a third party. The respondents on realizing this brought a claim for a declaration that it was entitled to purchase the assets and that sale to the third party was null and void. It also sought an injunction to restrain the appellants from validating the “purported” sale and an order of specific performance of the agreement between it and the appellants.
At the trial court, the respondents argued that the appellants letter of offer to them was validly accepted by them in their own letter.
The trial court entered judgment for the respondents and the appellants appealed to the court of Appeal.
Unanimously upholding the appeal and reversing the trial court’s decision, the Court of Appeal stated as follows:
“…for an acceptance to be operative, it must be plain, unequivocal, unconditional and without variance of any sort between it and the offer, the offeree must unreservedly assent to the exact terms proposed by the offeror. In other words, a valid acceptance must fulfill the following conditions:
a. It must be plain
b. It must be unequivocal
c. It must be unconditional
d. It must be without variance of any sort between it and the offer
e. It must be communicated to the offeror without unreasonable delay.
Furthermore, in the instant case the acceptance was not operational due to its failure to fulfill all the essential components of an acceptance. According to Omosun, J.C.A.,
“…the respondent must unreservedly assent to the exact terms proposed by the 1st defendant/appellant. If while purporting to accept the offer as a whole it introduces a new term which the offeror has not had the chance of examining, he is in fact mere making a counter-offer. The effect of which in the eyes of the law is to destroy the original offer. Exhibit “6” was not a mere request for information. It asked for extension of time of payment by three weeks while Exhibit “5” said payment of or substantial part of it was to be made within the next three days. A conditional assent to an offer does not constitute acceptance. Counter Offer
Conditional acceptance – acceptance “subject to contract” and “provisional” acceptance.
A conditional acceptance is not a valid or binding acceptance. Any acceptance which is made subject to a condition cannot create a binding contract until that condition has been met or fulfilled. For example, if in a negotiation for a lease or the sale of land, the agreement is made “subject to contract” the incidence of liability is postponed until a formal document is drawn up and signed.
This is a rule of long-standing and has been regularly applied since the nineteenth century. Thus, in Winn V. Bull (1977) 7 Ch.D.29, the defendant agreed to take a lease of a house “subject to the preparation and approval of a formal contract”. It was held that in the absence of a formal contract the agreement was not binding.
Other examples in which it has been held that the parties have made the operation of their contract conditional upon the execution of a further documents are:
a. An agreement to purchase freehold land “subject to a proper contract to be prepared by the vendor’s solicitors”
b. An agreement to take a flat “subject to suitable agreements being arranged between your solicitors and mine”.
After a brief period of uncertainty created by the decision in Law V. Jones (1974) Ch.112; which gave the impression that an agreement could be binding in spite of the use of the term “subject to contract”. It is now clear that the meaning attached to the phrase “subject to contract” has become fixed. Namely, a non-binding agreement.
Thus, in Tiverton Estates Ltd. V. Wearwell Ltd. (1974) All E.R.209,C.A., where the plaintiff relying on Law V. Jones alleged that the defendant was bound by an agreement under which he agreed to sell leasehold property to the plaintiff subject to contract, it was held by the English Court of Appeal (overruling Law V. Jones) that the agreement was not binding. It does not appear that payment of that purchase price, or at least part-payment of it, can negate the effect of the use of the term “subject to contract”.
Thus, in the later case of Cohen V. Nessdale (1981)3 All E.R.118, it was held by Kilner-Brown, J., that a lease agreement made subject to contract was not binding on the vendor in spite of the fact that the purchaser had paid a ground rent of £50 in respect of the flat whose purchase price was £20,000.
In Att. Gen. of the Federation V. Awojoodu, the contrary was the case, for here the contract stated that the provisional agreement was not to be binding on the defendant until a bond was executed by him.
The term “provisional” is not a magic term which automatically invests binding quality on an agreement. Indeed, prima facie, it shows that the agreement has not yet ripened into a contract. It is, therefore, a term whose effect can only be determined from the context of its usage. In this case, the context emphatically negated the existence of a binding agreement between the parties. Counter Offer
Cross Offers – Counter Offer
cross offers occur when two offers, identical in terms, are sent by two parties to each other, by post or by any other means, and the offers “cross” in the post or en route. This is easily illustrated hypothetically. Supposing X, who has been negotiating with Y to buy Y’s car for some time, writes to Y, offering to buy the car for ₦50,000 and Y, independently and in ignorance of X’s intentions writes to X offering to sell his car to Y for £50,000, and both letters cross in the post.
Is there a contract for the sale of Y’s car to X for £50,000? The answer to that is “no” all we have are two identical offers and no acceptance. For a contract to emerge, there must be an offer by one party to the other, reacting to the offer, indicates his acceptance of it.
In other words, there has to be meetings of the minds or consensus ad idem. In Tinn V. Hofman & Co., the defendants wrote to the plaintiff on November 28, 1871, offering to see him 800 tons of iron at 69 shillings per ton. On the same day, the plaintiff wrote to the defendants offering to buy 800tons at 69shilling per ton.
The letters crossed in the post. The plaintiff contended that there was a contract for 800 tons at 69shilling per ton. It was held that there was no contract. There were merely two simultaneous offers.
“…when a contract is made between two parties there is a promise by one, in consideration of the promise made by the other, there are two assenting minds, the parties agreeing in opinion, and one having promised in consideration of the promise of the other-here is an exchange of promises; but I do not think exchanging offers would, upon principle, be at all the same thing.
According to Salmond and Williams:
…agreement involves the apparent meeting of the minds of the parties, an apparent union of their wills. How can there be an apparent union of wills when neither party at the moment when he declares his will, can have heard the declaration to the will of the other? Counter Offer
Acceptance in ignorance – Counter Offer
Can an offer be accepted by someone who was unaware of it? The answer to this question may sound rather trite particularly in the light of judicial opinion about Cross Offers. Although the answer to it should be a straight “no”, the position was not clear for a long time. The problem arises mainly from the “reward” cases.
In Gibbons V. Proctor, the defendant published a handbill offering a reward of £35 to anyone giving to a superintendent Peen, information that would lead to the arrest of a person who had assaulted a young girl. The plaintiff supplied the information before the handbill was published and, therefore, in ignorance of the offer of reward.
Nevertheless, he was held entitled to the reward. This decision has been subjected to severe criticism and it is generally agreed that it was wrong.
Anson calls it unsatisfactory and Higgins, J., of the High Court of Australia declared as follows in R. V. Clarke:
“…this (the decision) would seem to mean that a man can accept an offered contract before he knows that there is an offer. That knowledge of the offer before the informer supplies the information is immaterial to the existence of the contract. Anson on contract thinks it is wrong. I venture to think so too…”
Attempts to justify the decision by arguing that by the time the information supplied by the plaintiff actually reached Penn, the former had known of the offer, are not convincing. The statement of principle in the earlier United States case of Fitch V. Snedaker is regarded as correct. There, it was held that a reward could be claimed by one who did not know that it had been offered. “How can there be consent to that of which the party has never asked? Declared Woodruff, J., in that case.
In R. V. Clark, the High Court of Australia, purporting to apply the doctrine of the meeting of the minds stated in Fitch V. Snedaker went to the other extreme.
Facts of the case:
In that case the police issued a notice offering a reward of £1,000 for information leading to the arrest and conviction of the murderers of two policemen, and a pardon to such an informant if he was merely an accomplice. The plaintiff was arrested in connection with the murders, and gave information whilst in custody, leading to the arrest of the murderers. He also gave evidence at the trail which lead to their conviction.
He brought an action to claim the reward when the police authorities refused to give it to him. It was held that:- he was not entitled to the reward.
Although he had knowledge of the offer of reward at the time he gave the information, he gave the information in order to clear himself from a charge of murder and not to earn the reward.
His mind was not directed to the reward. He was, therefore, not better than a person who is ignorant of the reward. This appears to have been a departure from correct principles because of the Court’s repugnance for the immoral nature of Clark’s claim. It is clearly a departure from the older and generally accepted decision in Williams V. Carwardine.
There the defendant offered a reward of £30 to anyone who gave information leading to the conviction of the murderers of Walter Carwardine. The plaintiff knew of the offers, and thinking that she had not long to live made a voluntary statement to ease her conscience and to obtain forgiveness in heaven.
The statement resulted in the conviction of the murderers. It was held that she was entitled to the reward. Her motive was irrelevant. What was important was that she was aware of the offer of reward when she gave the information.
In spite of efforts to distinguish the facts of R. V. Clark from Williams V. Carwardine it would appear that they are similar, and that the former (R. V. Clarke) was wrongly decided.
In summary then, it can be stated that an act which merely coincides with the requirements contained in an offer is not an acceptance if the person doing the act was not aware of the existence of the offer at the time he performed the act. However, once this prior knowledge exists, motive or intention is irrelevant.