Business law today comprehensive text and cases diverse ethical online and global environment miller

Business Law

Comprehensive Text and Cases Diverse, Ethical, Online, and Global Environment Miller 10th Edition Test Bank

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Chapter 9

Agreement in Traditional and E-Contracts

N.B.: TYPE indicates that a question is new, modified, or unchanged, as follows.

N A question new to this edition of the Test Bank. + A question modified from the previous edition of the Test Bank, = A question included in the previous edition of the Test Bank.

TRUE/FALSE QUESTIONS

1. For an offer to be effective, the offeror must have a serious intention to become bound by the offer.

ANSWER: T PAGE: 235 TYPE: N

BUSPROG: Analytic AICPA: BB-Legal

2 An offer does not need to be communicated to the offeree to become effective.

ANSWER: F PAGE: 235 TYPE: N

BUSPROG: Analytic AICPA: BB-Legal

3. An offer made in obvious anger is still an effective offer.

ANSWER: F PAGE: 235 TYPE: N

BUSPROG: Analytic AICPA: BB-Legal

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

4. An expression of opinion “this is perfect!” is an effective offer as long as it is not made in jest.

ANSWER: F PAGE: 237 TYPE: N

BUSPROG: Analytic AICPA: BB-Legal

5 A seller’s price list is not an offer.

ANSWER: T PAGE: 237

BUSPROG: Reflective AICPA: BB-Legal

TYPE: N

6. A circular letter “Dear Mr. or Ms. Jones, This is our biggest sale ever!” is not evidence of an intent to enter into a contract.

ANSWER: T PAGE: 237 TYPE: N

BUSPROG: Reflective AICPA: BB-Legal

7 In most cases, an offeror can revoke an offer as long as the revocation is communicated before the offeree accepts.

ANSWER: T PAGE: 242 TYPE: N

BUSPROG: Analytic AICPA: BB-Legal

8. Revocation is effective on dispatch.

ANSWER: F PAGE: 242 TYPE: N

BUSPROG: Analytic AICPA: BB-Legal

9. In most states, revocation becomes effective on receipt.

ANSWER: T PAGE: 242 TYPE: N

BUSPROG: Analytic AICPA: BB-Legal

10. If no time for acceptance is specified in an offer, the offer terminates after a reasonable length of time.

ANSWER: T PAGE: 243 TYPE: N

BUSPROG: Analytic AICPA: BB-Legal

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

11. The death of an offeree does not terminate an offer.

ANSWER: F PAGE: 243 TYPE: N

BUSPROG: Analytic AICPA: BB-Legal

12. An offer that a statute makes illegal terminates only after a reasonable time.

ANSWER: F PAGE: 243 TYPE: N

BUSPROG: Analytic AICPA: BB-Legal

13 An option contract is created when an offeror promises to hold an offer open for a specified period of time in return for a payment given by the offeree.

ANSWER: T PAGE: 243 TYPE: N

BUSPROG: Analytic AICPA: BB-Legal

14. The mirror image rule requires an acceptance to adhere exactly to an offer to create a contract.

ANSWER: T PAGE: 243 TYPE: N

BUSPROG: Analytic AICPA: BB-Legal

15 Some unilateral contracts do not require that an offeror be notified of acceptance.

ANSWER: T PAGE: 244 TYPE: N

BUSPROG: Analytic AICPA: BB-Legal

16. In a bilateral contract, communication of acceptance is necessary.

ANSWER: T PAGE: 244 TYPE: N

BUSPROG: Analytic AICPA: BB-Legal

17 The mailbox rule applies to communication by phone and fax as well as the mail.

ANSWER: F PAGE: 245 TYPE: N

BUSPROG: Analytic AICPA: BB-Legal

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

18. If an offeror does not expressly specify a certain mode of acceptance, then acceptance can be made by any reasonable means.

ANSWER: T PAGE: 245 TYPE: N

BUSPROG: Analytic AICPA: BB-Legal

19 A forum-selection clause indicates the forum, or location, for the delivery of goods purchased online.

ANSWER: F PAGE: 247 TYPE: N

BUSPROG: Reflective AICPA: BB-Legal

20. The agreement resulting from a buyer clicking on a box containing the words “I agree” is known as a click-on agreement.

ANSWER: T PAGE: 247 TYPE: N

BUSPROG: Reflective AICPA: BB-Legal

21 A click-on agreement is an agreement whose terms are expressed inside a box in which the goods are packaged.

ANSWER: F PAGE: 247 TYPE: N

BUSPROG: Analytic AICPA: BB-Legal

22 A shrink-wrap agreement is an agreement whose terms are expressed inside a box in which the goods are packaged.

ANSWER: T PAGE: 249

BUSPROG: Analytic AICPA: BB-Legal

TYPE: N

23. Not all of the terms presented in shrink-wrap agreements have been enforced.

ANSWER: T PAGE: 249 TYPE: N

BUSPROG: Analytic AICPA: BB-Legal

24. Browse-wrap terms are arguably not enforceable.

ANSWER: T PAGE: 250 TYPE: N

BUSPROG: Analytic AICPA: BB-Legal

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

CHAPTER 9: AGREEMENT IN TRADITIONAL AND E-CONTRACTS 5

25. Browse-wrap terms require a user to affirmatively indicate his or her consent.

ANSWER: F PAGE: 250 TYPE: N

BUSPROG: Analytic AICPA: BB-Legal

26. Under the Electronic Signatures in Global and National Commerce Act, a signature may not be denied legal effect solely because it is in electronic form.

ANSWER: T PAGE: 250 TYPE: N

BUSPROG: Analytic AICPA: BB-Legal

27. Under federal law, an electronic signature can be as valid as a signature on paper.

ANSWER: F PAGE: 250 TYPE: N

BUSPROG: Analytic AICPA: BB-Legal

28 Under federal law, an e-signature is enforceable only if the contracting parties have agreed to use e-signatures.

ANSWER: T PAGE: 250 TYPE: N

BUSPROG: Analytic AICPA: BB-Legal

29. Under the UETA, a typed name at the end of an email message is not considered an e-signature.

ANSWER: F PAGE: 251 TYPE: N

BUSPROG: Analytic AICPA: BB-Legal

30. A record is an interaction between two or more people relating to business, commercial, or governmental activities.

ANSWER: F PAGE: 251 TYPE: N

BUSPROG: Analytic AICPA: BB-Legal

31. The primary purpose of the Uniform Electronic Transactions Act (UETA) is to remove barriers to e-commerce.

ANSWER: T PAGE: 252 TYPE: N

BUSPROG: Analytic AICPA: BB-Legal

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

32. Under the UETA, a contract is unenforceable if it is solely in electronic form.

ANSWER: F PAGE: 252 TYPE: N

BUSPROG: Analytic AICPA: BB-Legal

33. The E-SIGN Act does not preempt the uniform version of the UETA.

ANSWER: T PAGE: 252

BUSPROG: Analytic AICPA: BB-Legal

TYPE: N

34. Under the UETA, an e-signature of a notary public is not sufficient to notarize a document.

ANSWER: F PAGE: 253 TYPE: N

BUSPROG: Analytic AICPA: BB-Legal

35. The UETA does not require the use of security procedures to verify changes to electronic documents and to correct errors.

ANSWER: T PAGE: 254

BUSPROG: Analytic AICPA: BB-Legal

MULTIPLE CHOICE QUESTIONS

TYPE: N

1. Fresh Fast Service, Inc., offers to deliver produce to Growers’ Market’s customers for a certain price. Fresh’s intent to extend a serious offer to Growers’ Market is determined by reference to

a. Fresh’s assumptions.

b. Fresh’s beliefs.

c. Fresh’s intentions.

d. what a reasonable person in Growers’ position would conclude Fresh’s words and actions meant.

ANSWER: D PAGE: 235 TYPE: N

BUSPROG: Reflective AICPA: BB-Legal

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

CHAPTER 9: AGREEMENT IN TRADITIONAL AND E-CONTRACTS 7

2. May tries to start her new car with no success. She yells that she will sell the car to anyone for $10. Nick, a passerby who owns Nick’s Pre-owned Autos, hands May $10. This is

a. a valid acceptance because May is seriously frustrated.

b. a valid acceptance because Nick is a car dealer.

c. not a valid acceptance because May does not seriously intend to sell.

d. not a valid acceptance because Nick is a car dealer.

ANSWER: C PAGE: 235 TYPE: N

BUSPROG: Reflective AICPA: BB-Legal

3. Peter and Ray are riding their horses together. Peter jokingly tells Ray that Ray’s horse is too slow. Ray laughs and jokingly responds “Yes, he is too slow! I would sell him for $5!” Peter hands Ray $5. This is

a. a valid acceptance because Peter gave Ray the money in a reasonable time.

b. a valid acceptance because there is consideration on both sides

c. not a valid acceptance because Ray’s offer was made in jest.

d. not a valid acceptance because Ray’s horse is worth more than $5

ANSWER: C PAGE: 235 TYPE: N

BUSPROG: Reflective

AICPA: BB-Legal

4 Jacqi tells Kenneth, who does not know how to perform comedy, that she will tutor him in the subject for $500. As an offer, this is

a. effective.

b. not effective, because comedy is not a serious subject.

c. not effective, because Jacqi’s tutoring will be subjective.

d. not effective, because Kenneth has no knowledge of the subject.

ANSWER: A PAGE: 235 TYPE: N

BUSPROG: Reflective AICPA: BB-Legal

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

5. Mary admires Julia’s collection of scarves. Julia says “I might sell you a few someday, if I get tired of them.” Julia’s statement is

a. an effective offer.

b. not an effective offer because it has not been communicated to Mary.

c. not an effective offer because the Julia does not show a serious intent to be bound

d. an acceptance.

ANSWER: C PAGE: 235

BUSPROG: Reflective AICPA: BB-Legal

TYPE: N

6. Beth goes to Dr. Carlton for surgery. Carlton says that Beth should be fully healed within a week. Beth is not healed within a week. With respect to breach of contract, Carlton is

a. liable.

b. not liable, because surgery is not a proper subject for a contract.

c. not liable, because the statement was an opinion.

d. not liable, but Beth is excused from paying Carlton.

ANSWER: C PAGE: 237

BUSPROG: Reflective AICPA: BB-Legal

TYPE: N

7 Jon says to Kristy, “I would like to sell you my sports memorabilia collection.” This is not an offer because it

a. does not describe the subject matter sufficiently.

b. does not include a price term.

c. only expresses an opinion.

d. only invites Kristy to negotiate.

ANSWER: D PAGE: 237

BUSPROG: Reflective AICPA: BB-Legal

TYPE: N

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

8. Pastry Dough, Inc., sends its catalogue to Octavio and includes a “personalized” letter inviting him to buy any item in it at the advertised price. This is

a. an offer because of the “personalized” letter.

b. an offer because there is no room for price negotiation.

c. an offer only if Octavio previously bought items from Pastry Dough.

d. not an offer.

ANSWER: D PAGE: 237

BUSPROG: Reflective AICPA: BB-Legal

TYPE: N

9. Laredo advertises a reward for the return of his lost dog. Mikayla, who does not know of the reward, finds and returns the dog. Mikayla cannot recover the reward, because she

a. did not confer a benefit on Laredo by returning the dog.

b. did not know of the reward when she found and returned the dog.

c. does not need the money.

d. returned the dog.

ANSWER: B PAGE: 240

BUSPROG: Reflective AICPA: BB-Legal

TYPE: N

10. On May 1 Jill offers to sell Andrea a herd of sheep. On May 3 Jill mails Andrea a letter revoking the offer. Andrea receives the letter on May 5. Jill’s revocation of the offer to sell the sheep became effective on

a. May 1

b. May 3.

c. May 4

d. May 5.

ANSWER: D

PAGE: 242

BUSPROG: Reflective AICPA: BB-Legal

TYPE: N

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

11. Signe offers to sell Thomas her textbook but conditions the sale on Thomas accepting the offer by March 1. Signe may revoke the offer

a. before Thomas accepts the offer.

b. before March 1, whether or not Thomas has accepted the offer.

c. only after Thomas accepts the offer.

d. only after March 1.

ANSWER: A PAGE: 242

BUSPROG: Reflective AICPA: BB-Legal

TYPE: N

12. Wally offers to sell a certain used forklift to Valu Lumber Outlet, but Wally dies before Valu accepts. Most likely, Wally’s death

a. did not affect the offer.

b. shortened the time of the offer but did not terminate it.

c. extended the time of the offer.

d. terminated the offer.

ANSWER: D

PAGE: 243

BUSPROG: Reflective AICPA: BB-Legal

TYPE: N

13. Lovett County Bank offers to lend money to Kino, the owner of Java Stop, at 15 percent interest. Before Kino accepts, a state statute is enacted prohibiting loans at rates greater than 12 percent. Kino and the bank have

a. have a contract for a loan at 15 percent interest.

b. have a contract for a loan at 12 percent interest.

c. have a contract for a loan at 0 percent interest.

d. no contract for a loan.

ANSWER: D PAGE: 243

BUSPROG: Reflective AICPA: BB-Legal

TYPE: N

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

14. Jack offers to sell Ben a new car for $10,000. Ben accepts the offer and sells his old car so that he will have money for the new one. Jack’s offer is probably

a. revocable because the terms of the offer were not definite.

b. irrevocable because Ben sold his old car because of justifiable reliance on Jack’s offer to sell him a new car.

c. revocable because any offer is revocable

d. irrevocable because Jack’s offer represents an opinion contract.

ANSWER: B PAGE: 243 TYPE: N

BUSPROG: Reflective AICPA: BB-Legal

15. Liz offers to sell Jock her iPad for $500 without any accessories. Under the mirror image rule, Jock’s response will be considered an acceptance if the terms of the acceptance

a. exactly mirror those of the offer.

b. change the items offered, but do not change the price.

c. change the price, but do not change the items offered.

d. change both the price and the items offered.

ANSWER: A PAGE: 243 TYPE: N

BUSPROG: Reflective AICPA: BB-Legal

16. Shasta offers to sell a used hay baler to Roberto, but receives a letter of acceptance from Quito, who has no relation to Roberto. A valid contract exists between

a. Shasta and Roberto.

b. Shasta and Quito.

c. Roberto and Quito.

d. none of the choices.

ANSWER: D PAGE: 243 TYPE: N

BUSPROG: Reflective AICPA: BB-Legal

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

17. Shelby offers to make digital copies of Relay Company’s business conference videotapes, CDs, DVDs, and other media for $500. Under the mailbox rule, Relay’s acceptance by e-mail will be considered effective when

a. received.

b. sent.

c. followed up by a confirmation letter sent by regular mail.

d. composed on a Relay computer.

ANSWER: B

PAGE: 245

BUSPROG: Technology AICPA: BB-Legal

TYPE: N

18. Crafted Iron Works, Inc., offers to design, make, and sell City Transit Agency fourteen streetcars. Crafted authorizes a particular mode of communication, but City Transit sends an acceptance via a substituted means. This acceptance is effective when it is

a. in transit.

b. received.

c. sent.

d. written.

ANSWER: B

BUSPROG: Reflective

PAGE: 245

AICPA: BB-Legal

TYPE: N

19 Quality Sales Corporation enters into contracts over the Internet. Quality can protect itself against disputes involving these contracts by making important terms

a. reasonably clear.

b. difficult to notice.

c. impossible to find.

d. standardized.

ANSWER: A

BUSPROG: Technology

PAGE: 246

TYPE: N

AICPA: BB-Leveraging Technology

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

20. Mark is creating a Web site through which he will enter into contracts over the Internet. Important terms to include in his offers include

a. provisions specifying the remedies if the contract is breached.

b. a detailed history of his business.

c. glowing reviews from former customers.

d. his educational background.

ANSWER: A PAGE: 246 TYPE: N

BUSPROG: Reflective AICPA: BB-Legal

21. Deb buys a song through eSongs, an online music vendor. Before completing the purchase and downloading the song, Deb must agree to a provision stating that she will not make and sell copies of the song. This provision is

a. a browse-wrap term

b. a click-on agreement.

c. a shrink-wrap agreement.

d. a wrap-on agreement.

ANSWER: B PAGE: 247 TYPE: =

BUSPROG: Reflective AICPA: BB-Legal

22. Over the Internet, Red & White Contractors, Inc., arranges to lease storage space from Blue Services Company. To complete the deal, Red & White clicks on a button that says, in reference to certain terms, “I agree.” Most likely, the parties have

a. a binding contract that includes the terms.

b. a binding contract that does not include the terms.

c. an unenforceable contract that includes the terms.

d. an unenforceable contract that does not include the terms.

ANSWER: A PAGE: 247 TYPE: N

BUSPROG: Technology AICPA: BB-Legal

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

23. Hi-Lite Manufacturing, Inc., orders supplies online from Indigo Parts Company. To complete the order, the buyer is required to click on a button that says, in reference to certain terms, “I agree.” This is

a. a click-on agreement.

b. a default agreement.

c. an attribution agreement.

d. a shrink-wrap agreement.

ANSWER: A

BUSPROG: Technology

PAGE: 247

AICPA: BB-Legal

TYPE: N

24. Digital Products Company includes a shrink-wrap agreement in a transaction with Eagle Engineering Corporation. A shrink-wrap agreement is an agreement whose terms are expressed

a. in code at the end of a computer program .

b. inside a box in which goods are packaged.

c. in small print at the end of a paper contract signed by both parties.

d. on a computer screen.

ANSWER: B

BUSPROG: Technology

PAGE: 249

AICPA: BB-Legal

TYPE: N

25. Jared downloads some video games from the Internet. There is a page indicating the terms of use, but nothing that requires Jared to affirmatively indicate his consent before downloading the games. These terms are

a. a click-on agreement.

b browse-wrap terms.

c. an attribution agreement.

d. a shrink-wrap agreement.

ANSWER: B

BUSPROG: Technology

PAGE: 250

AICPA: BB-Legal

TYPE: N

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CHAPTER 9: AGREEMENT IN TRADITIONAL AND E-CONTRACTS 15

26. Vivian and Rob enter into a contract under which Vivian will clean Rob’s house every week for a year. Under the E-SIGN Act, in order for e-signatures to be enforceable for this contract

a. Vivian and Rob must both agree to use e-signatures.

b. only Vivian needs to agree to use e-signatures.

c. only Rob needs to agree to use e-signatures.

d. Vivian and Rob must both register their e-signatures with the federal government.

ANSWER: A PAGE: 250 TYPE: N

BUSPROG: Technology AICPA: BB-Legal

27 Clean Health Insurance, Inc. sends Kathy a health insurance termination. The health insurance termination is

a. governed by the E-SIGN Act.

b. not governed by the E-SIGN Act.

c. governed by Article 2 of the UCC.

d. governed by Article 2A of the UCC.

ANSWER: B PAGE: 250 TYPE: N

BUSPROG: Technology AICPA: BB-Legal

28 First Design Corporation, a business firm, and Glen, a consumer, make a deal over the Internet that involves e-signatures. Under the E-SIGN Act, the esignatures

a. are as valid as signatures on a paper document.

b. must be encrypted to be enforceable.

c. must have been inscribed on a digital tablet to be authenticated.

d. must relate to a partnering agreement.

ANSWER: A PAGE: 250 TYPE: N

BUSPROG: Technology AICPA: BB-Legal

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29. Under the E-SIGN Act, Phillip may use an e-signature in all of the following instances except

a. opening an account with a financial institution.

b. obtaining a mortgage.

c. buying insurance.

d. signing his will.

ANSWER: D PAGE: 250

BUSPROG: Technology AICPA: BB-Legal

TYPE: N

30 Fred’s Paper Shop frequently buys paper from Online Office Supplies, Inc. Online Office Supplies and Fred’s Paper Shop decide to enter into a partnering agreement. One of the advantages of entering into a partnering agreement is that

a. the costs of all transactions will be reduced.

b. the likelihood that disputes will arise under their contract is reduced.

c. neither party will be able to file suit for breach of contract.

d. Fred’s Paper Shop will not be able to file suit for breach of contract.

ANSWER: B PAGE: 250

BUSPROG: Reflective AICPA: BB-Legal

TYPE: N

31. Standard Purchasing Corporation and Total Sales, Inc., enter into a partnering agreement. Under a partnering agreement, parties agree

a. in advance to terms that apply to their future e-transactions.

b. to become partners.

c. to conduct transactions solely in electronic form.

d. to resolve all disputes without involving a third party.

ANSWER: A PAGE: 250

BUSPROG: Reflective AICPA: BB-Legal

TYPE: N

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

32. Kay and Leo enter into a contract that falls within the provisions of the UETA. Under the UETA, “an electronic sound, symbol, or process attached to or logically associated with a record and executed or adopted by a person with the intent to sign the record” is

a. an e-document.

b. an e-signature.

c. an e-transaction.

d. a record.

ANSWER: B PAGE: 251 TYPE: N

BUSPROG: Technology

AICPA: BB-Legal

33. Bill and Stacy enter into a contract that falls within the provisions of the UETA. Under the UETA, “information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form” is

a. an e-document.

b. an e-signature.

c. an e-transaction.

d. a record.

ANSWER: D PAGE: 251 TYPE: N

BUSPROG: Technology

AICPA: BB-Legal

34. Michelle gives out a business card with an e-mail address on it. It is reasonable to infer that Michelle has consented to

a. transact business electronically.

b. submit to the jurisdiction of any selected forum.

c. accept and respond to any correspondence sent to that address.

d. nothing.

ANSWER: A PAGE: 252 TYPE: =

BUSPROG: Technology

AICPA: BB-Legal

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

35. National Shipping Corporation and Office Software Company (OSC) make a deal for OSCs products, communicating entirely online. Under the UETA, an electronic record is considered sent

a. only at a midway point between the sender and recipient.

b. only on coming into the recipient’s control.

c. only on leaving the sender’s control.

d. when it leaves the sender’s control or comes into the recipient’s control.

ANSWER: D PAGE: 254

BUSPROG: Technology

ESSAY QUESTIONS

AICPA: BB-Legal

TYPE: N

1. Creative Solutions Corporation (CSC) sells business application software accounting and bookkeeping programs, blank business forms, inventory control functions, and the like in different combinations, in different packages, at different prices, downloadable online. To complete a deal, a purchaser clicks on a button that, with reference to certain terms, states, “I agree.” What is this sort of agreement called? Do the parties have a binding, enforceable contract that includes the terms? Explain.

ANSWER: This is a click-on agreement, which occurs when a buyer, to complete a transaction on a computer, indicates his or her assent to be bound by the terms of an offer by clicking on a button that says, for example, “I assent,” or, in this question, “I agree.” Such an agreement is likely enforceable if a party who agrees to the terms has an opportunity to read them before the contract is made, except when they are objectionable on grounds that apply to contracts generally. If the terms are not revealed until after an agreement is made, however, it is unlikely that, as in cases involving shrink-wrap agreements, they would be considered part of the deal. In this question, the parties probably have a binding contract that includes the terms. The question states that the button referred to the terms, meaning the buyer knew, or should have known, what he was agreeing to.

PAGES: 247–249

BUSPROG: Technology

TYPE: N

AICPA: BB-Decision Modeling

2. Beta Software Company and Gamma Sales Corporation agree to follow a certain security procedure in transacting their business online. Beta fails to

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

follow the procedure, however. Due to this failure, Beta does not detect an error in the deal, which will have a negative impact on Gamma’s interest in the deal. Can Gamma avoid the effect of this error? How?

ANSWER: Under the UETA, Gamma can avoid the effect of this error only if the firm takes reasonable steps to return any benefit or consideration received from Beta under their agreement. If the parties to a deal subject to the UETA agree to a security procedure and one party does not detect an error because it does not follow the procedure, the other party may be able to avoid the effect of the error. To do so, the conforming party must (1) promptly notify the other party of the error and of his or her intent not to be bound by it and (2) take reasonable steps to return any benefit or consideration received. If there cannot be restitution, the transaction may not be avoidable. If the parties to such a deal do not agree to a specific security procedure, other state laws determine the effect of an error .

PAGE: 254 TYPE: N

BUSPROG: Technology

AICPA: BB-Decision Modeling

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