What happens when an initial offer is answered with a counteroffer?

• A. The counteroffer is legally enforceable
• B. Initial offer is void
• C. An arbitrator decides on a compromise
• D. Initial offer is automatically accepted

Answer: (B)

When you respond to an offer with a counteroffer, you reject the original terms and put a new set of terms on the table. The effect is that the initial offer is terminated (no longer available to accept). The counteroffer becomes the new offer, and only if the other party accepts it will a binding contract be formed. There’s no automatic acceptance, and no arbitrator’s involvement at this moment. The key idea is that the original offer dies once a counteroffer is made, and a fresh offer is now on the table.