Future Business Leaders of America (FBLA) Business Law Practice Exam

What is a response to an offer where the terms of the original offer are changed called?

1. Counteroffer

2. Acceptance

3. Rejection

4. Offer

The correct answer is: Counteroffer

A response to an offer that involves changing the terms of the original proposal is called a counteroffer. When a counteroffer is made, the original offer is no longer valid, as the responding party has proposed different terms that modify the initial agreement. This signals to the original offeror that the responder is not simply accepting the terms as they were presented, but is instead proposing a new set of terms for consideration. In the context of contract law, a counteroffer serves as both a rejection of the initial offer and a new offer in itself, which the original offeror can then choose to accept, reject, or further negotiate. This mechanism plays a critical role in negotiations, as it allows both parties to communicate their needs and seek a mutually agreeable arrangement. Understanding the distinction between a counteroffer and other responses is essential. For instance, an acceptance involves agreeing to the terms of the original offer without modification, while a rejection means outright refusal of the offer without any additional terms being introduced. Recognizing these differences helps clarify the process of negotiation and contract formation in business law.