NAU ACC 205 EXAMS SCRIPT 2025/2026 QUESTIONS AND
ANSWERS GRADED A+
✔✔acceptance - ✔✔part of agreement (in contract requirements); must be voluntary,
only by the person the offer was made to, and follow the Mirror Image Rule
✔✔agency by estoppel - ✔✔when a principal causes a third party to believe that an
agency exists
✔✔capacity - ✔✔one of the four requirements of a contract; exceptions are:
minors (voidable)
mentally incompetent (void--adjudicated by court, voidable--not adjudicated by court)
intoxicated (voidable unless person understood)
✔✔consequential damages - ✔✔covers indirect and foreseeable losses
✔✔compensatory damages - ✔✔covers direct losses and costs
✔✔punitive damages - ✔✔to punish a deter wrongdoing
✔✔nominal damages - ✔✔recognizes wrongdoing when no monetary ($) loss is shown
✔✔consideration - ✔✔one of the four requirements of a contract; something of legally
sufficient value (promise, performance, refraining from doing something)
✔✔duress - ✔✔unlawful pressure brought on a person causing them to do something
they normally wouldn't
✔✔franchise - ✔✔authorization to carry out specified commercial activities
✔✔fraud - ✔✔wrongful/ criminal deception intended to result in personal gain
✔✔general partnership - ✔✔each partner is responsible for their own AND the other
partners' actions
✔✔legality - ✔✔one of the four requirements of a contract; contract must be for a legal
purpose (can be illegal because it's contrary to statute(law), or contrary to public policy)
✔✔offer - ✔✔part of agreement (requirement of a contract); must display:
intention (words or action)
reasonably certain terms
communication between parties
, ✔✔past consideration - ✔✔an act done before the contract is made; cannot be included
in the contract
✔✔ratification - ✔✔acceptance or affirmation of a legal obligation; staying in a voidable
contract
✔✔disaffirmance - ✔✔legal avoidance of an obligation; getting out of a voidable
contract
✔✔recission - ✔✔action to undue/ terminate a contract
✔✔revocation - ✔✔withdrawing offer by express statement or action
✔✔sole proprietership - ✔✔business=owner; easiest and least expensive form of
business; unlimited liabilty
✔✔specific performance - ✔✔when someone breaches a contract and the court makes
them follow through (common with land because every piece of land is unique)
✔✔strict liability - ✔✔responsible regardless of who is at fault; does not depend on
intent to harm or actual negligence
✔✔UCC (Uniform Commercial Code) - ✔✔deals with contracts for the sale of goods
✔✔UCC characteristics - ✔✔--open terms (except quantity)
--battle of the forms (not counteroffer)
--Merchant's Firm Offer
--tangible items
✔✔undue influence - ✔✔when one party can greatly influence another party, thus
overcoming that party's free will (voidable contract because it lacks voluntary consent)
✔✔LLC (Limited Liability Company) - ✔✔must legally form (articles of incorporation),
duration is forever, liability is limited for each owner, flexible
✔✔S corporation - ✔✔no more than 100 shareholders (not publicly traded); flow-
through taxation
✔✔C corporation - ✔✔traditional; publicly traded; double taxation
✔✔defenses of negligence - ✔✔--assumption of risk (knowledge and voluntary
assumption (ex. skydiving))
--contributory/ comparative (expectation of reasonable degree of care)
--superseding clause (unforeseeable event)
ANSWERS GRADED A+
✔✔acceptance - ✔✔part of agreement (in contract requirements); must be voluntary,
only by the person the offer was made to, and follow the Mirror Image Rule
✔✔agency by estoppel - ✔✔when a principal causes a third party to believe that an
agency exists
✔✔capacity - ✔✔one of the four requirements of a contract; exceptions are:
minors (voidable)
mentally incompetent (void--adjudicated by court, voidable--not adjudicated by court)
intoxicated (voidable unless person understood)
✔✔consequential damages - ✔✔covers indirect and foreseeable losses
✔✔compensatory damages - ✔✔covers direct losses and costs
✔✔punitive damages - ✔✔to punish a deter wrongdoing
✔✔nominal damages - ✔✔recognizes wrongdoing when no monetary ($) loss is shown
✔✔consideration - ✔✔one of the four requirements of a contract; something of legally
sufficient value (promise, performance, refraining from doing something)
✔✔duress - ✔✔unlawful pressure brought on a person causing them to do something
they normally wouldn't
✔✔franchise - ✔✔authorization to carry out specified commercial activities
✔✔fraud - ✔✔wrongful/ criminal deception intended to result in personal gain
✔✔general partnership - ✔✔each partner is responsible for their own AND the other
partners' actions
✔✔legality - ✔✔one of the four requirements of a contract; contract must be for a legal
purpose (can be illegal because it's contrary to statute(law), or contrary to public policy)
✔✔offer - ✔✔part of agreement (requirement of a contract); must display:
intention (words or action)
reasonably certain terms
communication between parties
, ✔✔past consideration - ✔✔an act done before the contract is made; cannot be included
in the contract
✔✔ratification - ✔✔acceptance or affirmation of a legal obligation; staying in a voidable
contract
✔✔disaffirmance - ✔✔legal avoidance of an obligation; getting out of a voidable
contract
✔✔recission - ✔✔action to undue/ terminate a contract
✔✔revocation - ✔✔withdrawing offer by express statement or action
✔✔sole proprietership - ✔✔business=owner; easiest and least expensive form of
business; unlimited liabilty
✔✔specific performance - ✔✔when someone breaches a contract and the court makes
them follow through (common with land because every piece of land is unique)
✔✔strict liability - ✔✔responsible regardless of who is at fault; does not depend on
intent to harm or actual negligence
✔✔UCC (Uniform Commercial Code) - ✔✔deals with contracts for the sale of goods
✔✔UCC characteristics - ✔✔--open terms (except quantity)
--battle of the forms (not counteroffer)
--Merchant's Firm Offer
--tangible items
✔✔undue influence - ✔✔when one party can greatly influence another party, thus
overcoming that party's free will (voidable contract because it lacks voluntary consent)
✔✔LLC (Limited Liability Company) - ✔✔must legally form (articles of incorporation),
duration is forever, liability is limited for each owner, flexible
✔✔S corporation - ✔✔no more than 100 shareholders (not publicly traded); flow-
through taxation
✔✔C corporation - ✔✔traditional; publicly traded; double taxation
✔✔defenses of negligence - ✔✔--assumption of risk (knowledge and voluntary
assumption (ex. skydiving))
--contributory/ comparative (expectation of reasonable degree of care)
--superseding clause (unforeseeable event)
