Reference - Not So Rich Uncle

question 101

Multiple Choice

Reference - Not So Rich Uncle. Bruce is attempting to convince Sally to marry him. He promises her that if she will marry him, he will buy a new Mercedes automobile for her within six months of the marriage and take her on a world tour within a year of the marriage date. Sally reluctantly agrees, and they sign an agreement by which Bruce agrees to provide the Mercedes and world tour. Bruce and Sally marry on January 1. Unexpectedly, on March 1, Bruce's supposedly rich uncle, Frank, dies. Frank has no living relatives other than Bruce, and Frank's will leaves everything to Bruce who is also appointed executor. In attempting to settle the estate, Bruce agrees orally to pay out of his own pocket debts of Frank totaling $10,000. Sally is concerned about Bruce's doing so. Bruce tells her not to worry because he will get all the money back when the estate settles. Bruce admits to a number of friends that he agreed to settle the debts out of his own pocket because he needed to obtain assets from the estate in a hurry. The assets were needed in large part to satisfy his obligations to Sally. Surprisingly, it later came to light that prior to his death Frank had signed away all his assets to his girlfriend in Argentina. There was nothing left in the estate for Bruce to inherit. Bruce disavowed his agreement to pay $10,000 to various creditors. Which of the following is the most likely result of Bruce's attempt to avoid his agreement to pay creditors of the estate out of his own pocket?

• A) He will be able to avoid the agreement because it was not in writing.
• B) He will be able to avoid the agreement because a promise to pay the debts of an estate would never come within the statute of frauds.
• C) A promise to pay debts of an estate out of an executor's own funds would come within the statute of frauds, but the oral agreement Bruce made will likely be enforceable under the substantial-purpose rule.
• D) A promise to pay debts of an estate out of an executor's own funds would come within the statute of frauds, but the oral agreement Bruce made will likely be enforceable under the main-purpose rule.
• E) A promise to pay debts of an estate out of an executor's own funds would come within the statute of frauds, but the oral agreement Bruce made will likely be enforceable under the primary-purpose rule.

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Definitions:

Journal Entry

A record of a business transaction in the accounting journal that shows the accounts and amounts debited and credited.

Merchandise Inventory

Goods a business has acquired to sell to customers but has not yet sold.

Cash Equivalent

Short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

Certificate of Deposit

A savings certificate issued by a bank to a person depositing money for a specified length of time, typically earning a fixed interest rate.