10.2 Contract Creation

10.2 Contract Creation

A contract is created through offer and acceptance—the offeror proposes terms, and the offeree accepts without changes. Any change is a counteroffer, which voids the original offer.

• Offer: Must state all terms clearly and be communicated to the offeree.
• Acceptance: Must be unequivocal and communicated to the offeror to form a contract.
• Counteroffer: Any change creates a new offer; the original is void.
• Revocation: An offer can be revoked any time before acceptance is communicated.
• Termination: Offers can terminate by acceptance, rejection, revocation, expiration, counteroffer, or death/insanity.
• Assignment: Most real estate contracts (not personal service contracts) can be assigned unless prohibited in the contract.
• Contract preparation: State law limits what contracts brokers/agents can prepare; unauthorized practice of law is prohibited.

Check-In Question

• What happens if an offeree changes any term of an offer?
  The original offer stands
  It becomes a counteroffer and the original offer is void
  The contract is automatically accepted
  The offeror must accept the changes
  Show Answer

  Correct Answer: It becomes a counteroffer and the original offer is void