In Chapter 12, we focus on learning about the first element, which is "The Agreement." An agreement must have an offer and acceptance. Assuming the other 5 elements of a contract are satisfied, a binding contract is formed as soon as an offer is accepted.

Counteroffers are a common occurrence in attempting to get to an agreement. Any change to an offer, even with words of acceptance, is a counteroffer. A counteroffer, or any change to the terms of the original offer, is also a rejection of the original offer even without specific words of rejection. This means that the offeree cannot go back and accept the first offer after making any offer changing the terms of the deal. Any new or different term added into the discussion "kills" the preceding offer.

Look at the following exchange:

Leah: Hey Karli, I hear you are looking for a used laptop. I will sell you mine for $400. (This is an offer.)

Karli: Great, your computer is exactly what I am looking for! I accept your offer, but you need to throw in the laptop case. (This is a counteroffer and rejection of original offer. The original offer from Leah is now dead and unable to be accepted.)

Leah: Wonderful, I will sell the case, too, but the price for both the computer and case would be $425. (This is another counteroffer and rejection of Karli's offer. Karli's counteroffer is now dead and unable to be accepted.)

Karlie: Oh, that is over my budget. I will accept your original offer of $400 for the laptop alone. (This is another counteroffer and rejection of Leah's 2nd offer.)

Leah: Never mind, I don't think I'm interested in selling it anymore. (This is rejection of Karli's 2nd offer.)

Karli: Too late, I accepted your offer so we have a contract for you to sell me the laptop for $400. (This is not correct as there has not been an offer or counter offer that has been accepted. There is no contract here, even though we have words of acceptance.)

Chapter 12 - Funny Farm Case

Now we are going to test our understanding of offers, acceptances, revocations, rejections, counteroffers, and bilateral and unilateral contracts.

The following is from the movie "Funny Farm" with Chevy Chase (1988). In the classroom, we watch the last 20 minutes of this movie and pick out offers, acceptances, revocations, rejections, counteroffers, and bilateral and unilateral contracts. Because of copyright laws, I can't post the clip here. So I will do it in writing. You can watch this movie on your own if you'd like -- it's quite funny.