A and B Are Negotiating a Contract by Faxes Going

question 66

Multiple Choice

A and B are negotiating a contract by faxes going back and forth between them.During their negotiations,they agree on the subject matter of the contract,the price,and the date of performance.However,both agree that once the negotiations are complete,a formal written contract will be prepared and signed.In this situation

• A)one issue is whether the decision of A and B to put the negotiations into a formal written contract is a mere expression of their desire as to the manner in which the contract transaction will proceed.
• B)one issue is whether the negotiations contain all of the essential elements of a contract.
• C)one issue is whether the decision of A and B to put the agreement that arises out of the negotiations into a formal written contract is a term of the agreement.
• D)one issue is whether the decision of A and B to put the negotiations into a formal written contract is a condition precedent to the formation of a contract.
• E)none of the above

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Definitions:

Trade or Business

An activity carried out for the purpose of earning income or profit, involving regular and continuous operations in a particular field.

Depreciation

An accounting method to allocate the cost of a tangible asset over its useful life, reflecting wear and tear, decay, or obsolescence.

Gift Tax

A tax on the transfer of property by one individual to another while receiving nothing, or less than full value, in return.

Fair Market Value

The price at which an asset would trade in a competitive auction setting, reflecting the value of the asset in the marketplace.