Question 1

What are the four essential elements required to form a valid contract?

Accepted Answer

A valid contract requires offer, acceptance, consideration, and capacity (along with legality of purpose). All four elements must be present for the contract to be enforceable.

Question 2

Under the Statute of Frauds, which type of contract MUST be in writing to be enforceable?

Accepted Answer

Contracts that must be in writing include: contracts for the sale of goods $500 or more (UCC), contracts for the sale of real estate, contracts that cannot be performed within one year, contracts to answer for another's debt (suretyship), and marriage contracts.

Question 3

What is the legal effect of a counteroffer on the original offer?

Accepted Answer

A counteroffer terminates the original offer and creates a new offer. The original offeror is no longer bound by the original terms and becomes the offeree of the new counteroffer.

Question 4

What distinguishes a void contract from a voidable contract?

Accepted Answer

A void contract has no legal effect and cannot be enforced by either party (e.g., contracts for illegal purposes). A voidable contract is valid unless one party elects to disaffirm it, such as contracts made by minors or under duress.

Question 5

Under the UCC, what is the 'battle of the forms' rule, and how does it handle additional terms in an acceptance?

Accepted Answer

Under UCC §2-207, a definite expression of acceptance forms a contract even if it includes additional or different terms. Between merchants, additional terms become part of the contract unless the offer expressly limits acceptance, they materially alter the contract, or the offeror objects within a reasonable time.

Business Law for the CPA Exam

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