Question

John Freeden is negotiating with Bill Murray to buy Bill's mountain bicycle. The following conversation has taken place: John: "I will buy your mountain bike for $325.00." Bill: "I couldn't sell it for less than $375.00." John: "I'll take it for $375.00." Which of the following statements is true?
A) Bill and John have a contract for the sale of the bike at $375.00
B) Bill and John have a contract for the sale of the bike at $325.00.
C) Bill and John do not have a contract.
D) None of the above

Answer 1

Answer:

A) Bill and John have a contract for the sale of the bike at $375.00

Explanation:

John first made an offer to buy the bike at $325 ⇒ Bill responded with a counteroffer increasing the price of the bike ⇒ John accepted Bill's counteroffer ⇒ they have a binding contract.

When parties are bargaining a contract, the process of giving an initial offer and then a counteroffer (or counteroffers) is part of the process of forming a contract. It is a necessary part, since without this bargaining process there is no contract. A contract is formed when one of the parties accepts the other party's offer or subsequent counteroffer.