CPA REG: Contract Law
3 parts of a valid contract - ANS1. Offer
2. Acceptance
3. Consideration
Offer (and components) - ANSOfferer expresses a willingness to enter into contract with
offeree:
1. Definite terms (who, what, when, how much)
2. Intent
3. Communicated to offeree (when constructively received!)
Is a newspaper ad an offer? - ANSNo, because a mere invitation to offer, not actual intent.
Is "this offer is valid to the first 10 people!" considered an offer? - ANSYes! limits the scope.
Express vs Implied-in-fact contract - ANSExpress: oral/written with explicit terms of who,
what, when, where, how much
Implied-in-fact: behavior makes it clear of terms (don't need to expressly write it out.
If you (both) agree to mow neighbors lawn for $10 and have already done it, is it express or
implied? - ANSimplied terms because already performing behavior
Implied-in-law (Quasi Contract) - ANScourts decide that parties should be treated as if had
an agreement in order to avoid one party being unjustly enriched at expense of another
...ex. "poor" person gets free doc services and doc finds out they're rich. Can go to court and
allowed to bill for normal services.
When does an offer terminate? - ANS-expire
-revoked
-rejected
-counteroffer
-operation of law (death, illegal, destructed)
Can you revoke an option contract? - ANSNo. Consideration was paid to keep the offer
open.
If given an offer and respond with "would you consider $100 instead of $150?" is it
terminated? - ANSNo. not a counteroffer, just a proposal to change. Can still accept original
offer because it's still valid.
If given an offer and respond with "No, I'll give you $120 for it instead" is it terminated? -
ANSYes. Counteroffer. The offeree becomes the offeror
, If given an offer to exterminate for $100 and say "Yes I'll pay the $100 but can you also
include a termite inspection report" is it terminated? - ANSYes. Considered a rejection and
counteroffer
When is a contract considered executory vs executed? - ANSIf certain duties still remain to
be performed = executory
If complete = executed
What is the mirror image rule for acceptance? - ANSMust accept all terms without alteration,
otherwise counteroffer. Acceptance must be unequivocal and unqualified with respect to
terms.
If offer requires the offeree to perform some action in order to accept it... - ANSthe offeree
must perform that action in order to accept (not just verbally promise to perform)
What is the early acceptance rule/mailbox rule? - ANSAcceptance is effective when
transmitted/dispatched (if same or better means of communication)
When is the mailbox rule not in effect? - ANSIf the offer specifies that it is only when
received, not dispatched. "Only valid upon receipt" by offeror. MAKER IS THE MASTER.
If an acceptance is received after an offer has terminated, is it still a valid contract? -
ANSNo, but it is considered a counteroffer
If you send both an acceptance letter and a rejection letter, which one is valid? -
ANSWhichever was RECEIVED first (no mailbox rule)
Conditional acceptance? Ex. If agree to buy house only if the bank approves their loan
application, is it valid? - ANSYes! Must make a good faith attempt to ensure condition is
satisfied (valid loan application and sincerely attempt)
Bilateral vs unilateral contract - ANSbilateral: promise for a promise - can accept
unilateral: promise for an act (one sided) - can only accept when perform
Is the promise for a bonus if you pass your CPA a bilateral or unilateral contract? -
ANSUnilateral so no acceptance until perform
When are revocations/rejections considered active (mailed vs actually received) - ANSOnce
actually/constructively received by other party (vs acceptance and mailbox rule)
Is it valid and when is it effective?: Offer mailed on 1st that's received on 4th, revoked on 5th
that's received on 9th, offeree accepts on 6th that's received on 8th - ANSvalid!
revoked: on 9th when received
accepted: on 6th when transmitted
...not effective until received on 8th
What if offeror never receives the acceptance but it was mailed? - ANSStill valid! If because
of delivery service error.
3 parts of a valid contract - ANS1. Offer
2. Acceptance
3. Consideration
Offer (and components) - ANSOfferer expresses a willingness to enter into contract with
offeree:
1. Definite terms (who, what, when, how much)
2. Intent
3. Communicated to offeree (when constructively received!)
Is a newspaper ad an offer? - ANSNo, because a mere invitation to offer, not actual intent.
Is "this offer is valid to the first 10 people!" considered an offer? - ANSYes! limits the scope.
Express vs Implied-in-fact contract - ANSExpress: oral/written with explicit terms of who,
what, when, where, how much
Implied-in-fact: behavior makes it clear of terms (don't need to expressly write it out.
If you (both) agree to mow neighbors lawn for $10 and have already done it, is it express or
implied? - ANSimplied terms because already performing behavior
Implied-in-law (Quasi Contract) - ANScourts decide that parties should be treated as if had
an agreement in order to avoid one party being unjustly enriched at expense of another
...ex. "poor" person gets free doc services and doc finds out they're rich. Can go to court and
allowed to bill for normal services.
When does an offer terminate? - ANS-expire
-revoked
-rejected
-counteroffer
-operation of law (death, illegal, destructed)
Can you revoke an option contract? - ANSNo. Consideration was paid to keep the offer
open.
If given an offer and respond with "would you consider $100 instead of $150?" is it
terminated? - ANSNo. not a counteroffer, just a proposal to change. Can still accept original
offer because it's still valid.
If given an offer and respond with "No, I'll give you $120 for it instead" is it terminated? -
ANSYes. Counteroffer. The offeree becomes the offeror
, If given an offer to exterminate for $100 and say "Yes I'll pay the $100 but can you also
include a termite inspection report" is it terminated? - ANSYes. Considered a rejection and
counteroffer
When is a contract considered executory vs executed? - ANSIf certain duties still remain to
be performed = executory
If complete = executed
What is the mirror image rule for acceptance? - ANSMust accept all terms without alteration,
otherwise counteroffer. Acceptance must be unequivocal and unqualified with respect to
terms.
If offer requires the offeree to perform some action in order to accept it... - ANSthe offeree
must perform that action in order to accept (not just verbally promise to perform)
What is the early acceptance rule/mailbox rule? - ANSAcceptance is effective when
transmitted/dispatched (if same or better means of communication)
When is the mailbox rule not in effect? - ANSIf the offer specifies that it is only when
received, not dispatched. "Only valid upon receipt" by offeror. MAKER IS THE MASTER.
If an acceptance is received after an offer has terminated, is it still a valid contract? -
ANSNo, but it is considered a counteroffer
If you send both an acceptance letter and a rejection letter, which one is valid? -
ANSWhichever was RECEIVED first (no mailbox rule)
Conditional acceptance? Ex. If agree to buy house only if the bank approves their loan
application, is it valid? - ANSYes! Must make a good faith attempt to ensure condition is
satisfied (valid loan application and sincerely attempt)
Bilateral vs unilateral contract - ANSbilateral: promise for a promise - can accept
unilateral: promise for an act (one sided) - can only accept when perform
Is the promise for a bonus if you pass your CPA a bilateral or unilateral contract? -
ANSUnilateral so no acceptance until perform
When are revocations/rejections considered active (mailed vs actually received) - ANSOnce
actually/constructively received by other party (vs acceptance and mailbox rule)
Is it valid and when is it effective?: Offer mailed on 1st that's received on 4th, revoked on 5th
that's received on 9th, offeree accepts on 6th that's received on 8th - ANSvalid!
revoked: on 9th when received
accepted: on 6th when transmitted
...not effective until received on 8th
What if offeror never receives the acceptance but it was mailed? - ANSStill valid! If because
of delivery service error.
