Contract Law
CPA Regulation (REG) · Learn by Concept
Help Questions
CPA Regulation (REG) › Contract Law
The statute of limitations time period would begin from which of the following dates if there is a breach in a construction contract?
The date the contract is signed
The date the contract is breached
The date the work began
The date the contract is declared
Explanation
The statute of limitations begins when the contract is breached when the wrongdoing has begun. None of these other dates would be the starting period.
If a party to a contract engages in an anticipatory repudiation of the contract, which of the following statements is correct?
The repudiation is a material breach of the contract.
The repudiating party cannot retract the anticipatory repudiation.
The other party never has a duty to mitigate any losses resulting from the repudiation.
The other party cannot take action against the repudiating party until the time for performance has passed and performance has not occurred.
Explanation
Anticipatory repudiation occurs when a party declares that he or she does not intend to fulfill the obligations of a contract. This creates a material breach wherein the other party may take action prior to the repudiating party’s attempt at performance. The repudiating party may retract the repudiation unless the other party has cancelled or materially changed the contract.
In determining whether the consideration requirement to form a contract has been satisfied, the consideration exchanged by the parties to the contract must be:
Fair and reasonable under the circumstances
Of approximately equal value
Legally sufficient
Exchanged simultaneously by the parties
Explanation
To be effective, consideration must be legally sufficient which means something that the law recognizes as consideration.
Which of the following circumstances generally will cause a discharge of contractual duties by operation of law?
Novation
Accord and satisfaction
Anticipatory retaliation
Impossibility of performance
Explanation
“Operation of law” refers to legal consequences of events based on legal principles, rather than from an individual’s action or a court order. In the event that performance becomes impossible (e.g., a person contracted to provide services dies or becomes incapacitated), this necessarily discharges the duties of performance.
ABC offered, in writing, to sell DEF a parcel of land for \$200,000. If ABC dies, the offer will:
Automatically terminate despite DEF’s prior acceptance
Remain open for a reasonable time period after ABC’s death
Terminate prior to DEF’s acceptance only if DEF received notice of ABC’s death
Automatically terminate prior to DEF’s acceptance
Explanation
The death of an offeror prior to acceptance terminates the offer by operation of law without notice to the offeree.
Which of the following pairs of elements must a client prove to hold an accountant liable for common law fraud?
Material misrepresentation and breach of contract.
Freedom from contributory negligence and loss.
Scienter and justifiable reliance.
Intent to deceive and perjury.
Explanation
Common law fraud requires five elements all to be met: 1) misrepresentation of a material fact by the defrauding party; 2) scienter (intent to deceive); 3) intent to induce reliance; 4) reasonable reliance, and 5) actual damages to another party.