ExpertHard1 markMultiple Choice
CPA · Question 12 · Area II: Business Law
A debtor owes a creditor $10,000. The debt is barred by the statute of limitations. The debtor writes a letter to the creditor promising to pay $5,000 of the barred debt. Which of the following is true?
A debtor owes a creditor $10,000. The debt is barred by the statute of limitations. The debtor writes a letter to the creditor promising to pay $5,000 of the barred debt. Which of the following is true?
Answer options:
A.
The promise is unenforceable because there is no new consideration.
B.
The creditor can enforce the full $10,000 debt.
C.
The creditor can enforce the promise for $5,000.
D.
The promise revives the entire debt, but the statute of limitations restarts.
How to approach this question
Recall the exception to the consideration rule for debts barred by law.
Full Answer
C.The creditor can enforce the promise for $5,000.✓ Correct
C
Generally, a promise needs consideration. However, a written promise to pay a debt barred by the statute of limitations is enforceable without new consideration, but only to the extent of the new promise.
Common mistakes
Thinking the entire original debt is revived.
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