NAU ACC 205 TEST PAPER 2025/2026 QUESTIONS AND
ANSWERS GRADED A+
✔✔five ways to terminate an offer - ✔✔Revocation by Offeror before acceptance
Rejection by Offeree
Death or Incapacity of Offeror
Destruction of Subject Matter or Subsequent Illegality of Subject Matter
Lapse of Time/Failure of Condition(s) Specified in Offer
✔✔mailbox rule - ✔✔Acceptance by mail effective when placed in mailbox; however,
revocation of offer effective only when received by offeree.
If a rejection is received, then an acceptance is received, then there is no K.
If a rejection is sent by mail and an acceptance is communicated before it is received,
then there is a K.
✔✔3 elements of valid contracts - ✔✔-manifestation:of offeror's intent to be bound
-definite and certain terms: subject matter, price, quality, quantity, parties
-communication: to offer to offeree or offeror's agent.
✔✔contractual capacity - ✔✔Definition: Mental ability to understand rights and
obligations established by contract, with the presumptive ability to understand how to
comply with terms of agreement.
✔✔cc general rule of law - ✔✔Natural persons over the age of majority (18 in most
states) are presumed to have the full legal capacity to enter into binding legal contracts.
✔✔who lacks cc? - ✔✔Those adjudicated insane
Those adjudicated habitually intoxicated
Those with appointed legal guardians
✔✔who has cc? - ✔✔-minors: unless emancipated
-mentally incapacitated
-intoxicated
✔✔minors' rights to dissafirm contracts - ✔✔To exercise this right, a minor need only
demonstrate, through words and/or actions, intent to rescind a K.
Must rescind the K as a whole, not just a portion
Minor must return any consideration received (if still in minor's possession/control),
regardless of condition.
Even if consideration damaged/destroyed, other party has no recourse against minor.
, ✔✔legality of contracts - ✔✔Contracts must have a legal exchange as its subject matter
and must be able to be performed legally. Otherwise, the bargain is illegal.
Example: Agreement to commit a crime
Contracts violating statute(s) and/or "public policy"
✔✔effect of legal agreement - ✔✔General Rule: When an agreement is illegal, the
contract will typically be declared void by the courts. Contracts that are against public
policy are typically declared unenforceable.
✔✔negligent misrepresentation - ✔✔intentional elements: untruth, have acted upon
✔✔undue influence - ✔✔whether or not someone uses their relationship to take
advantage of them
✔✔duress - ✔✔based on fear, physical pain, no leading of minds
✔✔statute of frauds - ✔✔Definition: Rule of state law requiring certain types of contract
to be in writing in order to be enforceable
ex:prenups, sale of things more than $500, paying off debts
✔✔purpose of statute of frauds - ✔✔put all terms in writing, encourages reflection given
time
-Ease contractual negotiations by requiring sufficient, reliable evidence to prove
existence and specific terms of contract
Prevent unreliable, oral evidence from interfering with contractual relationship
Prevent parties from entering into contracts with which they do not agree
✔✔statute of fraud exceptions - ✔✔admission: once done your stuck
pp-rare: already started doing something and youll have to pay even if there was no
contract yet.
✔✔parol evidence rule - ✔✔explain without explaining
✔✔public policy - ✔✔law the principle that injury to the public good is a basis for
denying the legality of a contract or other transaction
✔✔circumstances resulting in discharge of contract - ✔✔Performance
Happening of condition or its failure to occur
Material breach by one or both parties
Anticipatory Repudiation (Anticipatory Breach)
Mutual Agreement
Mutual Recission
Substituted Contract
ANSWERS GRADED A+
✔✔five ways to terminate an offer - ✔✔Revocation by Offeror before acceptance
Rejection by Offeree
Death or Incapacity of Offeror
Destruction of Subject Matter or Subsequent Illegality of Subject Matter
Lapse of Time/Failure of Condition(s) Specified in Offer
✔✔mailbox rule - ✔✔Acceptance by mail effective when placed in mailbox; however,
revocation of offer effective only when received by offeree.
If a rejection is received, then an acceptance is received, then there is no K.
If a rejection is sent by mail and an acceptance is communicated before it is received,
then there is a K.
✔✔3 elements of valid contracts - ✔✔-manifestation:of offeror's intent to be bound
-definite and certain terms: subject matter, price, quality, quantity, parties
-communication: to offer to offeree or offeror's agent.
✔✔contractual capacity - ✔✔Definition: Mental ability to understand rights and
obligations established by contract, with the presumptive ability to understand how to
comply with terms of agreement.
✔✔cc general rule of law - ✔✔Natural persons over the age of majority (18 in most
states) are presumed to have the full legal capacity to enter into binding legal contracts.
✔✔who lacks cc? - ✔✔Those adjudicated insane
Those adjudicated habitually intoxicated
Those with appointed legal guardians
✔✔who has cc? - ✔✔-minors: unless emancipated
-mentally incapacitated
-intoxicated
✔✔minors' rights to dissafirm contracts - ✔✔To exercise this right, a minor need only
demonstrate, through words and/or actions, intent to rescind a K.
Must rescind the K as a whole, not just a portion
Minor must return any consideration received (if still in minor's possession/control),
regardless of condition.
Even if consideration damaged/destroyed, other party has no recourse against minor.
, ✔✔legality of contracts - ✔✔Contracts must have a legal exchange as its subject matter
and must be able to be performed legally. Otherwise, the bargain is illegal.
Example: Agreement to commit a crime
Contracts violating statute(s) and/or "public policy"
✔✔effect of legal agreement - ✔✔General Rule: When an agreement is illegal, the
contract will typically be declared void by the courts. Contracts that are against public
policy are typically declared unenforceable.
✔✔negligent misrepresentation - ✔✔intentional elements: untruth, have acted upon
✔✔undue influence - ✔✔whether or not someone uses their relationship to take
advantage of them
✔✔duress - ✔✔based on fear, physical pain, no leading of minds
✔✔statute of frauds - ✔✔Definition: Rule of state law requiring certain types of contract
to be in writing in order to be enforceable
ex:prenups, sale of things more than $500, paying off debts
✔✔purpose of statute of frauds - ✔✔put all terms in writing, encourages reflection given
time
-Ease contractual negotiations by requiring sufficient, reliable evidence to prove
existence and specific terms of contract
Prevent unreliable, oral evidence from interfering with contractual relationship
Prevent parties from entering into contracts with which they do not agree
✔✔statute of fraud exceptions - ✔✔admission: once done your stuck
pp-rare: already started doing something and youll have to pay even if there was no
contract yet.
✔✔parol evidence rule - ✔✔explain without explaining
✔✔public policy - ✔✔law the principle that injury to the public good is a basis for
denying the legality of a contract or other transaction
✔✔circumstances resulting in discharge of contract - ✔✔Performance
Happening of condition or its failure to occur
Material breach by one or both parties
Anticipatory Repudiation (Anticipatory Breach)
Mutual Agreement
Mutual Recission
Substituted Contract
