Thank you for your question.
Dalton's subsequent letter was an attempt to reopen the negotiations constituted an offer. Repp then had the ability to agree to Dalton's terms but chose not to by extending a counteroffer.
Repp is not legally bound to sell at $500k because that was merely an offer presented by Repp, to which Dalton countered. Since offers generally remain open until: (1) accepted, (2) rejected, (3) retracted prior to acceptance, (4) countered, or (5) expired by their own terms, by sending a counter offer, the $500k was taken off the table when the counteroffer was exchanged. A contract requires a meeting of the minds, since there is obviously no meeting of the minds here, no contract was formed. Repp cannot be held responsible for selling at $500k.
With regard to Afton v. Baird, it is likely to find that a contract existed. Although death of a party terminates an offer, it is important to remember that the general rule is that acceptance is effective at the time it is dispatched (defined as being delivered to the agency of communication) if it is established if the offeree accepts by the "authorized means of communication." Since the original offer was extended through mail, it is likely that response by telegram will be an "authorized form of communication". Therefore, the contract was formed on April 19th when Baird telegrammed his acceptance of the offer. (An acceptance is still valid when communicated to the telegramming agency, even if it does not reach the other party.)
Again, keep in mind that under the traditional contract rule, the offeror impliedly authorizes the offeree to employ the same means as the offeror used in communicating the offer. More recently, the authorized means concept has been expanded to include an offeror who is silent on the means of communication and in such cases, authorizes acceptance by any reasonable means. A telegram in this situation is undoubtedly a reasonable means.
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