Every contract is composed of an offer, an acceptance of that offer, and something called “consideration.” Consideration is the thing one person gives up in exchange for a benefit from the other. For example, if I pay agree to go to a concert if you will go, the consideration I am giving up is my action of going to the concert. The consideration you are giving is also the act of going to the concert. If my friend buys my bicycle, my friend is giving consideration in the form of money. I am giving consideration in the form of my bicycle. If my mother pays me to stay home for the evening, my mother is giving consideration in the form of money. I am giving consideration in the form of not engaging in an act I otherwise might have.
After an Offer is Made
When an offer is made by one party, the other party may accept or reject that offer. Once an offer is made by one party, and before the other party accepts that offer, the person making the offer may revoke the offer, or take it back. Once an offer is made and before it is accepted, the other party may propose a counter offer instead. It is rare that an offer is made and accepted with no negotiation, bargaining, or counteroffer.
Below is an explanation of aspects of the contractual negotiation process and the way they change the status of an offer.
1) Counteroffer Sometimes, rather than accept an offer when it is received, a party will instead make a counteroffer. A counteroffer is a rejection of the original offer and its terms. A counteroffer is basically a new offer that may or may not be accepted by the other party (the original party that made the offer).
2) Rejection A rejection terminates the offer. After a party rejects an offer rather than accept it, that party cannot later change his or her mind and accept the offer, unless a new offer has been made. The new offer may be identical to the old offer, but nonetheless the offer must again be made before it may be accepted.
3) Revocation The party making an offer may revoke his or her offer at any point prior to it being accepted. Revoking the offer terminates the other party’s ability to accept the offer. The revocation generally must be communicated to the party to whom the offer was made. However, once an offer is accepted, the party making the offer is no longer able to revoke the offer.