Understanding Offer and Acceptance in Land Sales

New conditions in an acceptance of sale terms can invalidate the acceptance.

Background. An individual (the “defendant”) who owned property adjacent to a church sent the church a letter indicating that the property was for sale. The letter provided that the property was offered for “$825,000 cash/mortgage, ‘as is’, with no conditions, no contingencies related to zoning and 120 days post closing occupancy for the present tenants.” This offer was dated June 3, and stated that it would remain open for a two-week period. The defendant also offered the property for sale to another potential buyer (White Chapel) at the same time. The next day (June 4) the church sent the defendant a letter indicating that it accepted the “terms of the offer” set forth in the letter. This letter included a “purchase agreement” that added some additional terms to the transaction.

On June 10 White Chapel sent the defendant a letter offering to buy the property for $900,000 cash. A few days later the church sent another letter to the defendant indicating that the original offer had been accepted on June 4, and an enforceable contract was created on that date. As a result, the church sought to close the real estate transaction. When the defendant refused to cooperate, the church filed a lawsuit asking a court to compel the defendant to honor the contract. A trial court granted the church’s request and ordered the defendant to proceed with the sale.

A state appeals court reversed the trial court’s ruling. It began its opinion by noting that in deciding whether there was a binding contract “or simply an offer by a party and a counter offer by another party, the language of the offer and acceptance must be examined.” For a contract to exist, “the acceptance must in every respect correspond substantially with the identical offer made.” The court stressed that an acceptance “must be absolute and unconditional,” and “a proposal to accept an offer which contains terms varying from that of the offer is a rejection of the offer.”

The court noted that the original offer submitted by defendant merely provided that the property was offered for sale for “$825,000 cash/mortgage, ‘as is’, with no conditions, no contingencies related to zoning and 120 days post closing occupancy for the present tenants.” Moreover, the offer was to remain open for a two week period. The purchase agreement enclosed with the church’s letter of acceptance “did comport with the purchase price and the closing occupancy period. However, the purchase agreement, contrary to the offer imposing ‘no conditions,’ contained additional terms and conditions. The purchase agreement was contingent upon financing and approval by parish regulations and further provided that the seller would assume costs.”

Since the church’s “acceptance” added additional terms to the defendant’s offer, it was not a valid acceptance and no contract was created. Rather, it was a counter-offer that the defendant never accepted.

Relevance to church treasurers. Church leaders should understand that offers cannot be “accepted” by documents that include terms or conditions that were not in the original offer. Such “acceptances” have the effect of revoking the offer, and amount to a counter-offer that the original offeror may accept or reject. This may have the unanticipated result of allowing a third party to accept the same offer that the church incorrectly assumed it had accepted. 2005 WL 1364501 (Mich. App. 2005).

This article first appeared in Church Treasurer Alert, July 2006.

Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.

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