If an offeree alters an offer before accepting it, what has occurred?

When an offeree alters an offer before accepting it, the action creates what is known as a counteroffer. This occurs because the original terms of the offer are modified, indicating that the offeree does not accept the offer as it was presented. Instead, the offeree proposes new terms which effectively reject the original offer.

In the context of contract law, a counteroffer serves as both a rejection of the original offer and a new proposal that the original offeror must consider. The original offer is no longer valid because it has been altered in a way that changes the agreement's terms. This means that the initial offer cannot be accepted in its original form, as it has been supplanted by the modifications proposed by the offeree. Therefore, the correct understanding is that the initial offer has been turned down, resulting in a counteroffer.