Contract Negotiation

Contract Negotiation. An offer shows a party’s intent to enter into a contract. In the typical contract formation process, one party begins by making an offer. For example, Julia owns a home she wants to sell. Alex offers to buy the property for $950,000. In this situation, Alex is the offeror (the person making the offer), and Julie is the offeree (the person receiving the offer).A common misunderstanding is that a completed purchase contract form automatically creates a contract. In reality, when a buyer fills in the contract form with their terms, it represents the buyer’s offer, not a binding contract. A contract is formed only after both parties agree to all material terms, including price, conditions, and obligations.Often, the offeree responds with a counteroffer by changing the terms of the original offer. For instance, if Julie counters Alex’s offer by proposing a price of $975,000 and requiring Alex to pay all closing costs, she has rejected Alex’s original offer and replaced it with a new one. A counteroffer completely cancels the original offer.