Contracts and Sales Multistate Bar Practice Exam

What occurs when a conditional acceptance is presented?

1. It automatically results in a binding contract

2. It operates as a rejection or counteroffer

3. It ensures the original terms are included in the contract

4. It can always be accepted by performance

The correct answer is: It operates as a rejection or counteroffer

When a conditional acceptance is presented, it operates as a rejection of the original offer and simultaneously constitutes a counteroffer. This is based on contract law principles that state any modification or condition added to an acceptance changes the nature of the agreement. Instead of simply agreeing to the terms of the original offer, the party is proposing an alternate set of terms that must be accepted by the original offeror for a binding agreement to arise. In this scenario, the original offer is effectively rejected because the acceptance is not unconditional; rather, it is contingent upon certain conditions being met. As such, no contract is formed until the counteroffer is accepted, which means that the original offeror must respond to the new conditions. This principle reinforces the importance of understanding how modifications to acceptance can impact the formation of contracts. Options implying that a conditional acceptance automatically creates a contract, preserves the original terms, or can always be accepted by performance misinterpret the nature of what constitutes a valid acceptance in contract law. This underscores the necessity for clear communication and understanding in contract negotiations.