A Necessary Element of a Contract Is That the Parties

question 80

Multiple Choice

A necessary element of a contract is that the parties must have the intention to be legally bound.Which of the following is true with regard to this element of a contract?

• A) In contract cases, the court hears evidence as to what the parties actually had in their minds at the time of contract.
• B) If the parties fail to state expressly in their contract their intention to be legally bound, there is no contract.
• C) The court always just presumes an intention to be legally bound, so this is never an issue in a contract case.
• D) The court can presume the intention to be legally bound, but a party to the contract can bring forward contrary evidence to rebut the presumption.
• E) Family members can never have the intent to be legally bound in their agreements because family matters are private matters.

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Definitions:

FIFO Method

First-In, First-Out method; an inventory valuation method where goods purchased or produced first are sold or used first.

Process Costing

A costing method used for homogeneous products, where the cost of each product is assumed to be identical to the cost of every other product.

Equivalent Units

A method used in cost accounting to measure the work done on inventory during a period, which considers partially completed units as a fraction of a full unit.

Conversion Costs

The combined costs of direct labor and manufacturing overhead, which are incurred to convert raw materials into finished products.