The bank can entertain other offers until they sign they purchase agreement and deliver it to you. Typically they give you a verbal acceptance but while the offer is being processed another offer may come in and then they reject yours. Make sure your client is aware of this and get them everything they need (signed counter offer, earnest money) as soon as possible. Ask the listing agent to move the house to pending status once you have an accepted verbal offer. They may not do it for you but I have had them agree to once we had a verbal agreement and I delivered the earnest money.
There is a difference between the ability to accept different offers with unilateral cancellation and not performing on an accepted offer. In theory, the seller could be sued for specific performance for failure to consumate a transaction, however this could be overridden by some of the banks' addenda.
Most often though in a short sale situation, the standard MN forms are the only forms used. If the sellers are actively working to sell the home (which they are if they signed a listing contract and a purchase agreement) then it is usually safe to assume that they will perform as agreed.
As with any contract, there has to be faith by both parties that the other party will abide by the terms... I've heard of very few situations where a buyer or seller has litigated over a failure to perform.
I'd like to know more of what you've heard.