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cpa0123
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Posted: 09 Jan 2010 at 17:29 \| IP Logged

Fenster Corp. requested Wein & Co., CPAs, to perform accounting services for it. Wein agreed to perform the services. Fenster and Wein had not discussed the amount of the fees. Which of the following is correct?

A. No contract was formed since the amount of fees was not agreed upon

B. A quasi contract was formed at the time Wein agreed to perform the services

C. A unilateral contract was formed on Fenster's request

D. A bilateral contract was formed at the time of Wein's agreement to perform

Answer D is correct. A bilateral contract is defined as a promise given in exchange for another promise. In this case Fenster promised to pay Wein and Wein promised to perform the service. Thus, a bilateral contract was formed since both parties gave consideration in the form of a promise to do something that they would not otherwise be legally bound to do.

I chose A since price is an important element in any offer & contract can not be enforced if there was no price mentioned originally. Becker mentions that way. Can someone explain?

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EAK5455
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Posted: 09 Jan 2010 at 20:50 \| IP Logged

When trying to determine if a contract exists for any question, ask yourself the question "was there a clearly manifested intent by the two
parties to create a contract?"

In this question there certainly is a clearly manifested intent by the CPA and the client to arrange for a contract of services.

The fact that the price was not stipulated in the contract does not preclude the contract itself from being enforced in court. In fact, a
court will reasonably infer any contractual terms which are omitted or ambiguous.

The only contract term than really must be in a contract to maintain its enforceability is quantity for a sale of goods contract. The
exception to this is a contract for specialty goods.

Example to explain:

Assume that Pete, a merchant retailer, wants to buy Playstation 3 units from Sony Corp. If Pete and Sony have a clear contract on the term of
quantity for 100 units, then a court can reasonably infer a fair market value for the 100 units. If they are not clear as to how many units
can be purchased, then there is no way for a court to determine what the FMV of the contract is and thus the contract is unenforceable.

Additionally, the court can infer a reasonable date that the units should be delivered, and a reasonable date by which Pete should make payment
to Sony.

Now lets say that they didn't agree to any terms at all except that Sony was to embed Pete's trademark logo "PETE PS3" on every unit that he
called for. If Pete tries to back out of the contract, a court can now reasonably infer the quantity of units that Pete intended to buy and
that Sony intended to sell because of the logo.

cpa0123
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Posted: 25 Jan 2010 at 00:08 \| IP Logged

EAK5455,

I don't understand how this is a bilateral contract. In this example, Fenster Corp never agreed to pay the CPA any amount. There is a promise to perform on the CPA's part however no promise has been made by the corporate.
Secondly, there is no substantial performance in this case as the CPA has not even commenced work. In such a situation how can the CPA prevail?

I understand the UCC Sales rules, but how is the answer justified? Would appreciate if you clarify.

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EAK5455
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Posted: 25 Jan 2010 at 09:52 \| IP Logged

The corporation has, through its actions, effectively agreed to pay a fair price for the services to be performed by the CPA firm. The CPA
can prevail because this is a service contract which falls under common law and doesn't require a signed writing under the statute of frauds.
If the Corporation were to breach, either anticipatorily or subsequently, then the CPA would have grounds to sue.

The bilateral contract is created through each parties' actions, rather than expressed words. If a corporation calls up a CPA firm and
requests services and the CPA firm agrees, then both parties have acted with a clear intent to enter into an agreement.

It may same odd because no price was stated. Remember, price does not have to be stated in the contract to be in enforceable. A court can
reasonably infer a fair price for the services. All that a court cares about in establishing enforceability is if the two parties really
intended to enter into an agreement.

My law professor gave an example which is somewhat on point:

Rose, who has had her tax return prepared by Smith & Co, CPAs for years, walks into Smith's office on January 15 and drops off a box of tax
forms, receipts, and financial statements on Smith's desk. She doesn't say a word to anyone and simply leaves. Smith arrives back at his
desk to see all of Rose's information laying there.

At this point, Rose has effectively made an offer to Smith to prepare her tax return, simply by her actions and with no terms whatsoever
agreed upon. Smith then can either accept by beginning to prepare the return or he can inform her that he doesn't want to prepare the
return.

Another example:

You walk into a gas station and see a Mountain Dew for $0.99. This is "an invitation to make an offer", but not an offer. You grab the
Mountain Dew and, without saying anything, put the soda on the clerk's desk.

At this point, you have made an offer to buy the soda for $0.99. The clerk then rings up the soda. You now have a contract for sale of
goods with the gas station, but it is still only executory in nature. After you hand the clerk the money and you take the soda, then you
have a completed contract.

Take note that there were no words involved at all in this fully enforceable contract, only actions.

cpa0123
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Posted: 25 Jan 2010 at 10:18 \| IP Logged

Wow that helps! Thank you so much!!

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