Carlos Visited Vancouver Last Summer and Instead of Going Back

question 156

Multiple Choice

Carlos visited Vancouver last summer and instead of going back to Ontario he stayed and enrolled at Simon Fraser University. He needed money but didn't need things left in Ontario, including his car. In mid-December, he wrote a friend and offered to sell the car for $4000 and told him to send him a letter with his answer. His friend received the letter on January 2, checked his financial situation, and sent a letter of acceptance January 3. Meanwhile Carlos, short of cash and not having heard from his friend, sold the car to Mr. Reno on December 31. Carlos received his friend's letter January 8. On these facts, which of the following is true?

• A) In order for there to be a binding contract, there must be an offer and receipt of the letter.
• B) All methods of acceptance are effective upon receipt by the offeror.
• C) Sending an acceptance by mail was not a reasonable method of acceptance in this situation.
• D) The letter of acceptance was effective when it was received, and by then Carlos had sold the car, so there was no contract.
• E) The acceptance was effective before it was received, so there was a contract between Carlos and his friend.

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Definitions:

Discount Rate

The interest rate used in discounted cash flow (DCF) analysis to determine the present value of future cash flows or to assess the attractiveness of an investment.

Straight-Line Depreciation

A method of allocating the cost of a tangible asset over its useful life in equal annual amounts.

Net Present Value

The difference between the present value of cash inflows and the present value of cash outflows over a period of time, used in capital budgeting to assess the profitability of an investment.

Initial Cost

The upfront expenditure involved in the purchase of an asset or the start of a project.