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My CPA-REGmodule26

Notecards I made from Wiley's 2012 CPA Exam Review

QuestionAnswer
What are the elements of a contract? offer, acceptance, consideration, legal capacity, legality (legal purpose)
What are the 8 types of contracts, give a word on each. Express-terms specifically stated Implied-terms inferred from conduct Executed-terms fully performed Executory-terms not fully performed Unilateral-1 gives promise Bilateral-each party gives promise Voidable-party has right to pull out Void-not enf
What are the requirements of a valid offer? may be written or oral -intent, definite and/or certain terms, communicated
What are examples of actions that dont fall under the concept of intent in an offer? How is intent judged by the courts? 1.promises made in apparent jest, statements of intent (Im going to sell my car for 400), invitations to negotiate 2.reasonable person standard
Who bares the risk of a mistake in the transmission of an offer? Offeror because he chose method of communication, so offer is effective as transmitted
How may an offeror terminate a contract? Can an offeror terminate an option contract? 1.specifically limits length of time of the offer, revoked (done any time before accepted, effective when received by offeree, offeree learns object already sold) 2.Not before stated time IF supported by consideration to hold open
How may an offeree terminate a contract? Reject the offer, offer a counteroffer (a mere inquiry doesnt not terminate) -effective when received by offeror
What events would automatically trigger the termination of a contract? Death of a party, incapacity of a party, subject matter is destroyed, proposed contract becomes illegal
Who can accept an offer? Does acceptance have to be written? Can anyone accept a reward? 1. only the person to whom the offer was directed 2. no can be oral 3. yes (must have knowledge of reward before completing to enforce) except someone who has a preexisting duty (law officer)
Do online click on agreements show legal intent to accept agreement? If the offeree accepts the contract but changes the terms is that acceptance? 1.Yes 2.No, that would be a rejection and counteroffer
When would silence indicate acceptance of a contract? offer indicated silence would constitute acceptance, offeree has taken benefit of service/goods and exercised control over them when could have rejected, if dictated by custom in prior dealings
What is the mailbox rule in regards to acceptance of a contract? What happens if rejection and acceptance are sent? 1.acceptance is effecting when sent (i.e when placed in mailbox). A lost or dealyed acceptance does not destroy validity 2.first one received would be the effective answer
If there are terms for the length of time of a contract and the offeree accepted the contract late, what is this thought of as? counteroffer and a valid contract is formed only if original offeror accepts
Under common law and UCC, when are offers, revocations, rejections, and counteroffers effective? When received
In an auction, whats the offer? When can a bidder retract bid? What is an auction "with reserve"?"without reserve"? What is the assumed if not specified? 1. the bid 2. up until the auctioneer announces sale is complete 3.auctioneer may withdraw goods before completion of sale announced 4.goods cant be withdrawn unless no bid made within reasonable time 5."with reserve"
Although offer and acceptance may appear to be there, what formation defenses would preclude there from being an agreement? Fraud, negligent misrepresentation and innocent misrepresentation, mistake(one party thinks material fact is true, but isnt), Duress(represents invalid consent), undue influence(unfair persuasion)
What are the elements included in fraud? misrep. of material fact(opinions no count even expert, silence count only if duty to speak), scienter(know of falsity w/intent or reckless disregard for truth), reasonable reliance injured party(no recovery if learn w/reasonable inquiry), resulted injury
What are the remedies available for fraud? defrauded party may affirm agreement and sue for damages under tort of deceit or may rescind contract and sue for damages that resulted from fraud
When may fraud occur in a contract? -Inducement (misrep occurs during contract negotiations, create voidable contract at option of defrauded party) -Execution(misrep in actual form of agreement, creates void contract)
What are the elements of misrepresentation and innocent misrepresentation? -involve innocent misstatement made in good faith(no scienter) -other elements same as fraud(misrep material fact, reasonable reliance by injured party, injury) -injured party can't sue,can get rescission(return parties back to precontract states)
Does a mistake occurs when both parties reasonably attach different meanings to words? what about the value of subject?Who can void a mutual mistake?Unilateral? 1.Yes 2.Doesn't allow contract to be void 3.Either party 4.Neither, unless non-mistaken party knowingly takes advantage of mistaken party
What counts as duress to accept a contract? What does extreme duress cause?Ordinary duress? 1. any acts or threats of violence or extreme pressure against a party or member of parties family which deprives party of free will and causes him to agree 2.agreement to be void 3.voidable agreement
What counts as undue influence to accept a contract? What does it cause? 1.very dominant person has extreme influence over a weaker person (weakness may be physical, mental, and/or emotional). May occur through fiduciary relationship(CPA,guardian, trustee,etc.) 2.agreement to be voidable
What counts as consideration? act promise or forbearance offered by one party and accepted by another as reason to enter into contract. -promise to do something not previously obligated to do, refrain to do something one has legal right to do
Does consideration have to be bargained for? Yes, this is essential. A creditor simply accepting a lesser some for an undisputed debt is not enforceable(if disputed okay b/c each party gives up something) -past consideration (consideration for prior act) is not bargained for
Is preexisting legal duty sufficient for consideration? Absolutely not, now new legal detriment is suffered.(no pay cops, more to finish house- unless unforeseen difficulties arose)
How does modification of existing contracts occur under common law? UCC? 1.needs new consideration on both sides to be legally binding 2.may be modified orally or written without consideration if in good faith
What are best effort contracts? contracts where parties are to use best efforts to complete contracts objectives
Can promissory estoppel act as a substitute for consideration? What are the elements needed? 1.Yes 2.Detrimental reliance on promise, reliance is reasonable and foreseeable, damage results if promise not enforced
What does mutuality of obligation mean concerning a contract? both parties must be bound or neither is bound
Does the promise to donate to charity constitute legal consideration? Yes based on public policy reasons
In regards to capacity, what happens if a minor disaffirms purchases of non necessaries? minor required to give back any part they still have, but may recover all consideration given and not pay for what he can't return
What contracts are now enforceable against a minor in most states? medical care, life insurance, psychological care, loans for education
What is a minor liable for in a contract for necessaries? What is included in necessaries? Can a minor disaffirm a contract for necessaries? 1.Reasonable value 2.food, shelter, clothing, education 3.Only if the contract is executory(not completed)
What is the statute of limitations for a minor to disaffirm a contract? When may a minor choose to ratify a contract? 1.There is none, can disaffirm at anytime until a reasonable time after turning 18 2.within a reasonable time after turning 18, prior ratification is not effective. Can be done by words(oral/written) or actions
If a minor misrepresents his age in a contract, how do most states handle this? Still allow minor to disaffirm -other options, allow disaffirm and other party sue for fraud, allow disaffirm if returns consideration in similar condition, or not allow to disaffirm
Who is thought of as incompetent, and what is the result of a contract made by these people? person adjudicated as insane(void, insane need not return compensation), diminished capacity(voidable, disaffirm need restitution), intoxication(enforceable unless wicked drunk and dont understand terms/nature of contract)
If a person enters into an illegal contract then halfway through completion decides against it, can the court help him get his consideration back? Yes (i.e buys stolen goods, before receive stolen goods says na ah i want my money back, then entitled to money)
What are examples of illegal contracts? agreement to commit tort/crime, agreement not to press criminal charges for consideration, services rendered w/o a license when required, usury(contract for greater than legal interest rate), contracts against public policy
What are the two types of licensing statutes? Which is enforceable? 1.Regulatory licensing to protect the public, Revenue-seeking to raise revenue for government 2.revenue-seeking (neighborhood kid paid to mow lawn, didnt get permit)
What are contracts against public policy? contracts in restraint of trade(employee no compete w/employer after end employment/give away trade secrets), sale of business seller agree not compete w/sold type of business for stated time period, exculpatory clauses(avoid liability for own negligence)
What contracts need to be be evidenced by writing according to the statutes of Fraud? What does evidenced by writing? 1agreement sell any interest in real estate(land and/or bldg), agreement cant be completed </=to a yr, sale goods >$500, sale of intangibles >$5,000, sale of securities 2.contract is in writing or sufficient written evidence to prove existence of contrac
Does a contract need to be evidenced by writing if performance could take place in less than one year? What if terms call for over a year, but could possibly take less? What if contract half performed but other side expected to take over a year? 1.No 2.Yes 3.No
What are the exceptions to writing requirements for sale of goods over $500 that are enforceable? Oral contract involving specially manufactured goods if seller has substantially started, if party admits oral contract in court(can't enforce beyond quantity of goods admitted), goods already paid for or buyer has already accepted
What is required by the UCC in a modification of written goods? How does the UCC differ from common law? 1.must be done in good faith, must be in writing if as modified is a sale of goods over $500 2.common law requires new consideration on both sides, UCC does NOT
What does the statute of frauds require to prove the existence of a contract? What is a sufficient writing? 1. evidence of writing or performance of the contract is sufficient proof 2. identify parties to the contract, identify the subject of the contract, signed by the party who is trying to be held liable
What is the parole evidence rule? applies only if written contract exists, says written agreement intended to be final and complete contract cant be contradicted by previous written or oral evidence
What are some exceptions to the parole evidence rule? party may present oral proof to prove existence of a formation, show terms not inconsistent with what parties wouldn't be expected to include in writing, explain intended meaning of ambiguity, show condition precedent
What has the E-SIGN Act, a federal law, done in respect to contracting online? What are exempt fro E-SIGN? 1.electronic signatures and electronic documents (if retainable and accurately reproduced) are valid 2.wills, court papers, foreclosures
What has federal law enacted to protect consumers from contracting online? consumers need to consent to receiving electronic contracts and records, businesses required to tell consumers of right to receive hard-copy documents, consumers must be able to indicate/demonstrate they have access to electronic records to be sent them
Are computer shrink wrap licenses and contracts generally enforceable? Yes even if buy without seeing or reviewing them first. Especially enforceable if had time to examine them with right of return
What does the federal anti spam law prohibit? lying in spam. SPAM IS ALLOWED
In contracts, what is assignment? Delegation? If one occur, must the other? 1.transfer of a right under a contract by one person to another 2.transfer of duties under a contract 3.No rights may be assigned without delegating duties or duties may be delegated without assigning rights
Is consideration needed for valid assignment? What does an assignment of a contract generally mean unless specified otherwise? 1.No 2.generally taken to mean both assignment of rights and delegation of duties
What are the exceptions to being able to make assignments and delegations? -contract involving personal services, trust, or confidence (need permission) -provision of contract prohibits(UCC no allow prohibiting assignment of monetary rights) -if assignment materially change risk/burden of obligor
Does an assignment extinguish the rights of an assignor? Delegation relieve delegator of his duties? 1.yes extinguishes rights of assignor (assignee acquires rights and has exclusive right to performance, obligor has notice then must pay assignee) 2.no does not relieve duties
What implied warranties to assignee does an assignor make? assignor will do nothing to impair rights of assignee, assignor has no knowledge of any fact that would impair value of assignment
What is the majority rule if the assignor makes more than one assignment of the same right? Minority rule? 1.first assignment prevails regardless of notices 2.first assignee to give notice to obligor prevails
What is a creditor beneficiary contract? Debtor contracts with a second party to pay the debt owed to the creditor(3rd party beneficiary) Creditor can recover from either party now if both default
What is a donee beneficiary contract? similar to creditor beneficiary, but promisee's intent is to confer a gift upon a 3rd party through promisor's performance. Can recover from promisor only
What is an incidental beneficiary contract? What are the third parties rights? 1.third party receives unintended benefit from a contract 2.No rights
What is a condition precedent in a contract? Condition subsequent? What does satisfaction as a condition mean? 1.condition must occur before promise/duty becomes due 2.condition that when it occurs it modifies/takes away duty 3.nrmly contract guarantees satisfaction based on reasonable person, if explicit performance doesnt occur till party satisfied
When is performance satisfied under the doctrine of substantial performance?(IMPORTANT) What happens if met? When normally used? 1.-substantial performance (deviations are minor) -there has been good-faith effort to comply with contract 2.damages for deviations are deducted from price if above met 3.in relation to construction contracts
When would payment of less than agreed-upon sum fulfill obligation? both parties compromise based on a bona fide dispute as to amount owed
Which words prevail in court, typed words, preprinted words, handwritten words? handwritten prevail over all typed words prevail over preprinted Preprinted words come in last
In a discharge of contracts, what is an accord and satisfaction? satisfy contract by doing something different accord-agreement to substitute new performance for original performance satisfaction-performance of the accord
How may a contract be discharged? agreement, performance becoming objectively impossible, breach of contract, anticipatory breach (repudiation), bankruptcy,
Are compensatory damages allowed as a remedy in contract law? consequential damages?Punitive damages? 1.yes equal to amount caused by breach 2.yes for damages arise as a consequence of breach (must be foreseeable to breaching party) 3.No
What is a liquidated damage clause in contract law? provision agreed to in a contract to set the amount of damages in advance if a breach occurs (not enforceable if punitive)
Why would the injured party in a breach use reasonable care to minimize loss? He cannot recover costs that could have been avoided (mitigation of damages)
What is rescission?Restitution? Release? Waiver? Reformation? 1.cancel contract parties put position were before 2.return consideration to injured party 3. 1 party relieves other of obligations 4. 1 party voluntarily gives up right (not enforcing in past counts) 5.court may reform contract to express true intent
Define promissory estoppel. implied contract at law. court rules contract exists even though an element is missing
Created by: Bsantoro