Business Law: Contracts
Contract law on the CPA exam covers the formation, performance, and enforcement of agreements, including common law contracts and UCC Article 2 (sales of goods).
Explanation
A valid contract requires offer, acceptance, consideration, capacity, and legality. The Statute of Frauds requires certain contracts to be in writing (real estate, goods ≥$500 under UCC, contracts that cannot be performed within one year, suretyship). The UCC governs sales of goods with more flexible rules than common law (e.g., firm offers, battle of the forms, perfect tender rule). Breach of contract remedies include compensatory damages, consequential damages, specific performance, and rescission.
Key Points
- •Five elements: offer, acceptance, consideration, capacity, legality
- •Statute of Frauds: real estate, goods ≥$500, >1 year performance, suretyship
- •UCC Article 2 applies to sale of goods; common law applies to services and real estate
Exam Tip
When a contract involves both goods and services, apply the predominant purpose test to determine whether UCC or common law governs.
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