The real answer to your question is found in YOUR contract, and assuming you have a buyers agent (you definately want one), that agent can direct you to where this issue is addressed in your contract.
These types of negotiations go much smoother when the agents are working together (in a noncontractual manner). A buyer should never assume that when they play hardball a seller will cave in. Sellers walk away from contracts all the time. When it comes to negotiating home inspection issues, it is always my preference to talk through things agent to agent to come up with an agreeable solution before we let a contract fall apart over something so silly.
If I understand correctly: The seller has not responded within the required response period (usually 3 days), nor have you removed the contingency before the expiration of the response period. In that case the contract has become void.
If you have further questions please give me a call at (202) 415 4266 and visit my website http://www.mokaiser.com.
"The failure of one party to respond to such counter-offer or to remove this contingency within the required response period shall result in the Contract becoming void at the expiration of that response period."
If you did not want the contract to become void then you needed to deliver notice that you were removing the contingency...and you needed to do that before the end of the sellers time period to respond to your counter-offer.
If you need assistance in purchasing a different home and are not already under a buyers agency agreement with another agent, please contact me. I would be happy to assist you.
Linton Hall Realtors