FC4

Question 1

What occurs when breach of contract is minor?

Answer 1

In common law, if breach is only minor. the non-breaching party is not discharged from terms and conditions of contract, but is entitled to damages

Question 2

Implied agreement

Answer 2

To perform in a non-negligent manner, consistent with the standards of the profession

Question 3

Breach of contract

Answer 3

Failure to perform substantially as agreed under contract

Question 4

2 types of agreements

Answer 4

1. Express

2. implied

Question 5

What types of damages can a tax client recover?

Answer 5

Compensatory damages, but not punitive

Question 6

List elements of recovery

Answer 6

Duty, breach, damages, Proximate cause

Question 7

Define standard

Answer 7

That degree of judgement and skill possessed by a reasonable accountant under all circumstances

Question 8

Define negligence

Answer 8

the performance of contract in a careless manner. Does not lead to punitive damages

Question 9

Define actual fraud

Answer 9

Fraud is an intentional tort that is made with scienter or a knowledge to deceive

Question 10

Define constructive fraud

Answer 10

Reckless disregard or gross negligence

Question 11

What must be proven by contracting party to establish defense of fraud?

Answer 11

1. Misrepresentation or omission of fact
2. Materiality
3. Scienter
4. Reasonable Reliance
5. Damages

Question 12

Describe the reasonable foreseeability approach to accountant liability

Answer 12

Accountant is liable to whomever they can reasonably foresee may use the f/s they certify or prepare

Question 13

Describe privity approach of Ultra mares vs. Touche to accountant liability

Answer 13

Accountant is liable only to those with whom they are in privity of contract

Question 14

List 3 primary approaches to accountant liability

Answer 14

1. the Privity approach of Ultr Mares vs. Touche
2. The Restatement “Limited Class” approach
3. The reasonable foreseeability approach

Question 15

Describe restatement “limited Class” approach to accountant liability

Answer 15

Accountant has 3rd party liability to a limited class of known or intended users of f/s whose specific identity need not be known by CPA

Question 16

List types of assent defenses that can be used to invalidate the formation of a contract

Answer 16

1. mistake
2. misrepresentation
3. fraud
4. duress
5. Undue INFLUENCE

Question 17

Under what circumstances can a unilateral mistake become a defense?

Answer 17

When other party knew or should have known of a mistake

Question 18

Describe formation mistake

Answer 18

When mistake is clerical/computational error so large that other party should have known

Question 19

remedies for lack of mutual assent

Answer 19

1. Rescission
2. damages
3. modification

Question 20

elements for misrepresentation or fraud

Answer 20

1. misrepresentation of statement of fact
2. intent to deceive
3. reliance on misrepresentation

Question 21

elements that constitute a fraud

Answer 21

1. intentional deceit
2. deceit of a material fact
3. reliance of party deceived

Question 22

undue influence

Answer 22

occurrence in which one party induces another party to enter into a contract by overcoming his or her free will through an abuse of a position of confidence

Question 23

duress

Answer 23

forcing of a party to enter into a contract under fear or threat of violence to that party or member of his or her family, or use of economic pressure to overcome party’s free will

Question 24

2 types of contractual mistakes that can occur

Answer 24

1. mutual ( bilateral) Mistakes (defense)

2. Unilateral mistake ( not always a defense)

Question 25

when do bilateral mistakes create a binding contract?

Answer 25

when mistake is due to

1. value
2. quality

Question 26

what types of contracts are enforced against minors?

Answer 26

1 contracts for necessaries or necessities

2. they ratify after reaching the age of majority