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For a Contract to be valid, there must be an Offer and an Acceptance of offer. The acceptance must be unconditional; otherwise it is not acceptance at all, and may be constituted a counter-offer. For example, if A offers to sell a something to B for, say, £100, and B offers £50, that is a counter-offer. If A accepts B's counter-offer, then there is a contract. The original offer is destroyed. This principle is demonstrated in Hyde v wrench (1840), for example.

In the case of A and B above, it is clear where the agreement lies: A and B have a contract for sale at £50. However, in many cases where there are repeated counter-offers it can be very difficult to determine where the real offer lies, if anywhere. This is particularly true in commercial practices, where companies have standard terms and conditions on which they are prepared to do business. If A makes an offer subject to his terms of conditions, and B an acceptance on his (A's) terms and conditions, what are the final terms of the agreement? For an example, see Butler v Ex-Cell-O (see: Butler machine tool co v ex-cell-ocorporation (1979)) This is sometimes called 'battle of the forms'.

Note that if a offer is made and the offeree requests additional information, this does not necessarily constitute a counter-offer. For example, if A offers to sell his car to B for £100, and B does not explicitly counter-offer but asks whether A would be prepared to accept £50, the original offer is not destroyed.