Key Takeaways

  • Rejection in contract law occurs when an offeree declines an offer, rendering it void and unenforceable.
  • Rejection can be expressed explicitly or implied through counteroffers.
  • Revocation, rejection, and expiration are key methods of offer termination.
  • Counteroffers replace the original offer and initiate a new negotiation process.
  • Legal remedies for rejection include negotiation, mediation, or reissuing an offer with revised terms.
  • Understanding the distinction between revocation and rejection is essential for contract enforcement.
  • Special rules apply to the rejection of goods under the Uniform Commercial Code (UCC).
  • If an offer is rejected but later accepted before the rejection is received, the acceptance prevails.
  • Consulting a contract attorney can help navigate offer rejections and counteroffers effectively.

Rejection in contract law occurs when one party rejects the offer made by another party. There are several different ways that rejection can occur, including verbally and through writing.

Basics of Rejection

Offer and acceptance is one of the most important parts of contract law. Rejection occurs when one party decides not to accept the offer that was made. Rejection can also mean that one party refused goods offered to them as a part of contractual performance.

If the goods offered in a contract do not conform to their contractual description, the buyer has the right to reject those goods. If the buyer wants to reject the goods, however, they should make their rejection within a reasonable amount of time after delivery. The buyer must also alert the seller that they are rejecting the goods. The Uniform Commercial Code outlines these requirements for rejection.

Rejection can mean different things depending on the law. For instance, in terms of Parliamentary law, rejection indicates a failure to ratify or adopt. In patent law, rejection means that a patent examiner decided that an invention cannot be patented. A rejection does not take effect until the offeror receives notification of the rejection. This is much different than acceptance, which occurs upon the sending of the notification of acceptance.

Because rejections take effect once received and acceptance takes effect once sent, it is possible to cancel a rejection by providing acceptance. For instance, if you reject an offer by mail and then later change your mind, you could accept the offer by phone call, and the acceptance would take priority if it occurs before the other party receives the rejection letter.

Express and Implied Rejection

Rejection in contract law can be categorized into two main types: express rejection and implied rejection.

  • Express Rejection: This occurs when the offeree explicitly states their refusal to accept the offer. This can be done verbally or in writing, such as saying, “I am not interested in this deal,” or sending an email rejecting the terms.
  • Implied Rejection: This occurs when the offeree takes actions that are inconsistent with accepting the offer. For example, making a counteroffer automatically rejects the original offer. Additionally, failing to respond within the specified time frame can serve as an implied rejection.

Rejection becomes effective only when it is communicated to the offeror. Unlike acceptance, which is valid upon dispatch under the mailbox rule, rejection must be received to take effect.

What Are Counteroffers?

If you respond to an offer by sending an offer of your own, this is known as a counteroffer. Sending offers and counteroffers are a normal part of contract negotiation.

When you send a counteroffer, it is same as rejecting the initial offer. Once the counteroffer is sent, the other party can respond in several ways:

  • Accept the new offer
  • Send their own counteroffer
  • Reject the new offer

Imagine, for instance, that you make an offer to sell your home to another person for $150,000, and this amount is due within 60 days. The potential buyer responds by offering to pay you $130,000 in 30 days. The buyer rejected your offer and sent you a counteroffer. You can now either accept the counteroffer, provide your own counter, reject the counteroffer, or let the offer expire without responding. Essentially, letting an offer expire is the same thing as rejection.

The Legal Effects of a Counteroffer

A counteroffer has significant legal implications in contract negotiations. Since a counteroffer inherently rejects the original offer, it cannot be revived unless the original offeror agrees to its reinstatement. The legal effects of a counteroffer include:

  • Termination of the Original Offer: Once a counteroffer is made, the original offer cannot be accepted unless the offeror renews it.
  • Shifting of Roles: The offeree making the counteroffer becomes the new offeror, and the original offeror now has the power to accept or reject the new terms.
  • New Legal Obligations: The counteroffer must comply with the requirements of a valid contract offer, including definite terms, legal subject matter, and mutual intent.

For instance, in real estate transactions, if a seller offers to sell a property for $250,000 and the buyer responds by offering $240,000, the original offer is void, and a new offer has been introduced.

Terminating an Offer

One of the most interesting facts about contract law is that offerors and offerees both have the right to terminate an offer. The offeree is the person who received the offer, and they can terminate an offer either by letting it expire or by rejecting the offer outright. Let's examine each option so that you can better understand how offer termination occurs.

If an offeree wishes to terminate an offer, they can easily do so just by letting the offer expire. Almost every offer has an acceptance deadline, and if the offeree does not provide acceptance during this timeframe, the offer terminates. If the offer does not include a strict deadline for acceptance, it will expire after a reasonable amount of time.

Rejection is another way that an offeree can terminate an offer. Once the offeror receives the notice of rejection, termination of the offeree will take effect.

There are two ways to reject an offer. First, the offeree can provide an express rejection. This can via mailing a letter, making a phone call, or sending an email. All that matters is that the offeror receives notification of the rejection. Second, an offeree can reject an offer by making a counteroffer.

Counteroffers mean that you are rejecting the original offer and then making a new offer. Essentially, making a counteroffer results in a role reversal, with the original offeror now becoming the offeree. It is common for counteroffers to be made during real estate transactions.

Revocation vs. Rejection in Contract Law

Understanding the difference between revocation and rejection is critical in contract law. While both lead to offer termination, they operate differently:

  • Revocation: Occurs when the offeror withdraws the offer before acceptance. The offeror must communicate the revocation to the offeree before they accept.
  • Rejection: Occurs when the offeree refuses the offer, which immediately terminates it.

A key distinction is that revocation can happen at any time before acceptance, whereas rejection is solely the offeree’s action. If an offeree initially rejects an offer but later changes their mind and attempts to accept, the acceptance will only be valid if communicated before the rejection is received.

Rejection of Goods Under the UCC

Under the Uniform Commercial Code (UCC), buyers have the right to reject goods that do not conform to the contract terms. However, certain conditions must be met:

  1. Timeliness: The rejection must occur within a reasonable time after delivery.
  2. Notification: The buyer must inform the seller of the rejection and provide reasons.
  3. Right to Cure: If the rejection occurs before the agreed-upon performance period expires, the seller may have the right to correct the defect.

Failure to notify the seller properly may result in the buyer being obligated to accept the goods. Additionally, in some cases, partial acceptance is allowed, where the buyer rejects only the defective portion of the goods.

FAQs

1. What happens when an offer is rejected in contract law?

When an offer is rejected, it becomes void and cannot be accepted later unless the offeror reissues it. Rejection terminates the offer, eliminating any contractual obligation.

2. Can a rejected offer be revived?

Generally, a rejected offer cannot be revived. However, if the offeror decides to present the same offer again, it can be reconsidered.

3. How does a counteroffer affect the original offer?

A counteroffer nullifies the original offer and introduces new terms. The original offeror must accept or reject the counteroffer before a contract can be formed.

4. What are common reasons for rejecting a contract offer?

Offers may be rejected due to unacceptable terms, failure to meet legal requirements, lack of mutual consent, or unfavorable economic conditions.

5. How does rejection differ from revocation?

Rejection is initiated by the offeree and terminates an offer, while revocation is initiated by the offeror and withdraws the offer before it is accepted.

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