Counter Offer was given in response to an offer. It is a proposal that is made as a result of an undesirable offer. It implies the rejection of the original offer and puts the ball back in the court of the original offerer who has three options: to –
(i) Accept it, expressly (by replying) or by implication (by not replying),
(ii) Issue another (counter-counter) offer, or,
(ii) Reject it expressly. No binding contract can be created until one party accepts the other’s offer. Counter offers come in many guises; a seller’s acknowledgment (with estimated delivery dates) of a purchase order may, in fact, constitute a counter-offer.
This type of offer permits a person to decline a previous offer and allows negotiations to continue. A counteroffer is uncertain. It is a new offer made in response to an offer received. For example, when the seller receives a low offer, the offeree can counter with a price, which he feels is reasonable. The buyer can either admit that offer or counter again. The seller can counter the offer; however, the offeree does not have to admit it.
Real life example, a seller wants to sell a Car for $15,000. A buyer arrives and offers $10,000 for the car. The offeror provides a counter offer asking for $11,000 with the objective of obtaining a higher price. If the offeree declines, the offeror cannot force the buyer to acquire the vehicle at $10,000, even though the buyer recommended that price.