An applicant applied for a health policy with a $500 deductible, but the insurer issued a policy with a $1,000 deductible and no acceptance of the original terms. Under contract law, the issued policy is best characterized as:

Why A is correct

When the insurer issues a policy on terms that differ from the application, the policy is a counteroffer rather than an acceptance. The insurer is effectively proposing different terms, and no contract is formed unless the applicant accepts those modified terms — for example, by accepting delivery and paying the premium. If the applicant rejects the counteroffer, no contract exists. This rule protects the applicant from being bound to terms that were never agreed to.

Why the other options are wrong

• B) Acceptance must match the offer's terms; the changed deductible means the insurer did not accept the original offer.
• C) A contract cannot simply ignore the applicant's offer; the different terms constitute a counteroffer that requires the applicant's assent.
• D) No statute automatically makes a counteroffer effective after a set number of days; the applicant must affirmatively accept it.

Memory hook

Different terms = counteroffer, not acceptance. The applicant must sign off on the change.