Anyone familiar with real estate law ?

You can't complete the deal at the original price, seller won't come down to appraised level. Stalemate.
Just cut bait and move on. Get the releases done, EMD back and find a different place if possible. Kick your agent in the tail to get it done and over with.

He can receive as many offers to buy as he likes.

If you sent a written counter offer based on the lower appraisal and seller refused, the deal may be dead right there. Don't know if MI RE forms have language regarding refusing an offer, likely does.

If your intent is to lock the guy up in a dead deal out of spite, don't bother. You have no "damages" at this point. Sucks the deal fell through.