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Clarett, who owned a retail business, left a note on a desk Clarett thought was occupied by Franklen. The note stated, "Please contract to purchase 20,000 widgets at the best possible price from Eisen Corp. for delivery in March." The desk was actually being used by Saranz, who made a contract for the purchase of the widgets as specified. Saranz had little negotiating experience and contracted for a high price. Which of the following statements is correct regarding the authority held by Saranz?
Since the note did not specify the intended agent (Franklen) and was left on Saranz’s desk, the note granted actual authority to Saranz to act on Clarett’s behalf as an agent. The agent’s skill in negotiating has no bearing on whether the contract is enforceable when actual authority has been given to the agent.
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Tim’s Real Estate, Inc., employs David to buy city property for a future apartment complex. Through Construction Co., David’s own corporation, David secretly purchases a city property that David discovered while searching for property for Tim. David later arranges to have Construction Co. sell the property to Tim for more than Construction Co. paid for it. David has breached the duty of:
The duty of loyalty requires than an agent not engage in self-dealing or competing against the principal. The only other option that is a defined duty of an agent is care, in which the agent must carry out the agency by avoiding negligence.
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Wilson gives Sussex power of attorney. In general, the power of attorney:
Power of attorney is generally used to provide an agent with authority to perform specific tasks. A power of attorney may be anyone, and only the principal must sign the power of attorney. Power of attorney lapses upon the death of the principal.
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What is the doctrine under which a corporation is made liable for the torts of the corporation’s employees when the torts are committed within the scope of employment?
Under the doctrine of respondeat superior, a principal, including a corporation can be held liable for an employee’s tort committed within the scope of employment.
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Which of the following conditions must be met to form an agency?
Formation of an agency relationship requires a principal who has contractual capacity.
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Usually, an agent will be liable under a contract with a third party when the agent is acting on the behalf of who?
Generally, the agent would not be held liable on the contract that he or she makes on the principal’s behalf if the principal is disclosed however the agent would be personally liable on contracts made when the principal is undisclosed.
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Which of the following pairs of elements must a client prove to hold an accountant liable for common law fraud?
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.
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Which of the following circumstances generally will cause a discharge of contractual duties by operation of law?
“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.
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If a party to a contract engages in an anticipatory repudiation of the contract, which of the following statements is correct?
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.
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In determining whether the consideration requirement to form a contract has been satisfied, the consideration exchanged by the parties to the contract must be:
To be effective, consideration must be legally sufficient which means something that the law recognizes as consideration.
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ABC offered, in writing, to sell DEF a parcel of land for $200,000. If ABC dies, the offer will:
The death of an offeror prior to acceptance terminates the offer by operation of law without notice to the offeree.
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The statute of limitations time period would begin from which of the following dates if there is a breach in a construction contract?
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.
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The registration requirements of the Securities Act of 1933 are intended to provide information to the SEC to enable it to:
The primary goal of the Securities Act of 1933 is to ensure that investors have sufficient information in order to inform investment decisions; the SEC does not assure the accuracy of the information or assess the financial merits of it.
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Under the Securities Act of 1933, the registration of an interstate securities offering is:
Several securities do not require registration, such as a Certificate of Deposit, securities issued by a governmental or non-profit organization, insurance policies, or short-term commercial paper (with a maturity of less than nine months). Issuer cost, riskiness, and dollar amounts are irrelevant with respect to the registration requirement.
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Under the liability provisions of Section 18 of the Securities Exchange Act of 1934, for which of the following actions would an accountant generally be liable?
Section 18 of the 1934 Act addresses only intentionally false or misleading representations in a registration statement.
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An accuracy related penalty applies to the portion of tax underpayment attributable to A) Negligence or a disregard of the tax rules or regulations B) Any substantial understatement of income tax:
Accuracy-related penalties apply to the portion of tax underpayments attributable to negligence or disregard of tax rules and regulation as well as to any substantial understatement of income tax.
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In evaluating the hierarchy of authority in tax law, which of the following carries the greatest authoritative value for tax planning of transactions?
The IRC holds the most value as an authoritative source in tax law and for regulations dictated throughout the US tax authority.
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If there was a material omission by an accountant, would he or she be held liable for damages under the Securities Exchange Act of 1934?
A plaintiff must prove that the accountant simply made a false statement or omitted a fact under section 10(b).
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