2009 R-5 Class Notes - Becker CPA Review Regulation 5 Class...

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Becker CPA Review – Regulation 5 Class Notes 1 © 2009 DeVry/Becker Educational Development Corp. All rights reserved. REGULATION 5 CLASS NOTES This lecture covers contract law and sales under the UCC. According to the AICPA's Content Specification Outline these items, and the items found in R6 and R7, should make up between 20% and 25% of your Regulation examination. CONTRACTS I. Terminology – A Contract is a legally enforceable agreement! A. Understand sources of contract law – The common law and the UCC and the RISE (Real Estate, Insurance, Services and Employment law) mnemonic. II. Creation of a Contract A. Elements of a contract - Agreement (offer and acceptance), consideration and lack of defenses. B. Understand what constitutes a valid offer and acceptance – "meeting of the minds." Advertisements – generally not offers. Terms must be definite and certain. Offer must be communicated to offeree. C. Termination of offer – Revocation , rejection (including counteroffers) and by operation of law (death, insanity, destruction and illegality). D. Acceptance – only the offeree may accept. Must use reasonable method - unless specified then must use specified method. Acceptance must be the Mirror Image of the offer except in contracts for sale of goods. E. Mailbox Rule acceptances are effective upon dispatch. Offeror may opt out by stating that "acceptance is effective upon receipt." F. Consideration legal value (not necessarily equal or fair) through a bargained for exchange . Preexisting duty rule - if already legally bound to perform, not adequate consideration. Some promises are enforceable without consideration – Detrimental Reliance is the most common equitable claim. III. Defenses A. Fraud - misrepresentation of a material fact, scienter, intent to induce plaintiff's reliance, justifiable reliance by plaintiff and damages. B. Innocent Misrepresentation – same as fraud but no "scienter." C. Duress – unlawful use of a threat of harm. D. Undue influence – abusing a position of trust or confidence. E. Mutual Mistake – both parties are mistaken as to a basic assumption of the contract. F. Unilateral Mistake – mistake by one party – generally not a defense unless the other party knew or should have known of the mistake. G. Illegality .
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Becker CPA Review – Regulation 5 Class Notes 2 © 2009 DeVry/Becker Educational Development Corp. All rights reserved. H. Minors may disaffirm anytime during minority and within a reasonable time after becoming an adult. They can ratify once they reach the age of majority by failing to disaffirm within a reasonable amount of time, expressly ratifying or retaining the benefits. Can't disaffirm necessities - food, shelter, clothing, etc. I.
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2009 R-5 Class Notes - Becker CPA Review Regulation 5 Class...

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