Contract Law

Question 1

Consideration

Answer 1

something of value that each party gives to the other (binding force in any contract)

Question 2

Fraud

Answer 2

intentional misrepresentation or deceit with the intent to induce a person to part with something of value

Question 3

insurance policy

Answer 3

a contract between a policyowner and an insurance company which agrees to pay the insured or the beneficiary for loss caused by specific events

Question 4

lapse

Answer 4

policy termination due to nonpayment of premium

Question 5

misdemeanor

Answer 5

a minor criminal offense, considered less serious than a felony

Question 6

unilateral contract

Answer 6

a contract that legally binds only one party to contractual obligations (one-sided)

Question 7

contracts

Answer 7

written agreements that are legally enforceable by law

Question 8

tort

Answer 8

a private, civil, non-contractual wrong for which a remedy through legal action may be sought. Can either be intentional or unintentional. Insurance generally will only respond to unintentional torts

Question 9

intentional tort

Answer 9

any deliberate act that causes harm to another person regardless of whether the offending party intended to injure that aggrieved party.

Question 10

agreement

Answer 10

offer and acceptance

Question 11

consideration

Answer 11

binding force in any contract - something of value that each party gives to the other.
Insured: payment of premium and the representations made in the application.
Insurer: the promise to pay in event of loss

Question 12

competent parties

Answer 12

legal age, mentally competent to understand the contract, and not under the influence

Question 13

legal purpose

Answer 13

contract must be legal and not against public policy. must have insurable interest and consent. a contract without legal purpose is considered voice and cannot be enforced

Question 14

contract of adhesion

Answer 14

is prepared by one of the parties (insurer) and accepted or rejected by the other party (insured). not drawn up through negotiations. offered on a take it or leave it basis

Question 15

conditional contract

Answer 15

certain conditions must be met by the policyowner and the company in order for the contract to be executed, and before each party fulfills it obligations. insured must pay the premium and provide proof of loss in order for the insurer to cover a claim

Question 16

unilateral

Answer 16

only one of the parties to the contract is legally bound to do anything. the insured makes no legally binding promises. an insurer is legally bound to pay losses covered by a policy in force

Question 17

unilateral

Answer 17

only one of the parties to the contract is legally bound to do anything. the insured makes no legally binding promises. an insurer is legally bound to pay losses covered by a policy in force

Question 18

personal

Answer 18

the insured cannot be changed to someone else without he written consent of the insurer, nor can the owner transfer the contract to another person without the insurer’s approval. life insurance is an exception: a policyowner can transfer (or assign) ownership to another person but it still must be in writing

Question 19

representations

Answer 19

statements believed to be true to the best of one’s knowledge, but not guaranteed to be true. the answers the insured gives to the questions on the insurance application
representations in insurance contracts qualify as implied warranties

Question 20

misrepresentations

Answer 20

untrue statements on the application

a written or oral statement that is intended to distract, mislead, or deceive a party to a contract

Question 21

warranty C440-445, 447

Answer 21

a statement considered to be guaranteed to be true and becomes part of the contract. can either be expressed or implied.

Question 22

express warranty

Answer 22

statements in a policy are considered express warranty. every express warranty becomes part of the insurance contract.
every express warranty made at or before the execution of a policy must be contained in the policy itself, or in another instrument signed by the insured and referred to in the policy
factual statements about the insured or the risk in an insurance policy are considered express warranty

Question 23

express warranty

Answer 23

every express warranty becomes part of the insurance contract. i

Question 24

implied warrenty

Answer 24

an unwritten or unspoken guarantee presumed to be made based on the circumstance of a transaction

Question 25

materiality CIC334

Answer 25

all parties to a contract are entitled to all information necessary to make an informed decision about the quality or nature of the contract. determined by the probably and reasonable influence of the facts that they would have on the party that needs the facts to make a decision, whether that party is the insurer or the insured. failure to disclose material information may entitle the injured party to rescind the contract

Question 26

concealment CIC330-339

Answer 26

the intentional withholding of information of a material fact that is crucial in making a decision. the withholding of information by the applicant that will result in an imprecise underwriting decision. concealment may void a policy

Question 27

rescission

Answer 27

the revocation of a contract

Question 28

six specifications for insurance policies CIC381

Answer 28

1. the parties to the contract
2. the persons or property being insured
3. a statement of the insurable interest that exists if the insured is not the owner
4. the risks insured against
5. the time period during which the policy will be in force or continue
6. the stated annual, semi-annual, quarterly, or monthly premium or a statement of the manner in which a premium rate and total premium will later be calculated, if it can only be determined at the termination of expiration of the contract

Question 29

six specifications for insurance policies CIC381

Answer 29

1. the parties to the contract
2. the persons or property being insured
3. a statement of the insurable interest that exists if the insured is not

Question 30

unintentional tort

Answer 30

the result of acting without proper care. negligence

Question 31

rate

Answer 31

the price of insurance for each exposure unit. the rate helps determine the premium by multiplying it by the number of units of insurance purchased

Question 32

material misrepresentation

Answer 32

a statement that would alter the underwriting decision of the insurance company. this could be considered fraud

Question 33

insurer or insured have the right to rescind the contract

Answer 33

whenever there is a violation of a material warranty, intentional, or unintentional concealment, or intentional or fraudulent omissions. the amount of paid claims would not rescind the policy

Question 34

consideration

Answer 34

something of value that each party gives to the other. the consideration on the part of the insured is the payment of premium and the representations made in the application

Question 35

all of the following information must be communicated in an insurance contract:

Answer 35

1. information that is material to the contract
2. information that is material even though it cannot be proven
3. information not requested by an agent and company, even if it’s considered relevant

Question 36

an offer is usually made when:

Answer 36

an applicant submits an application to the insurer

Question 37

what does NOT need to be identified in an insurance policy?

Answer 37

the insurer’s financial rating

Question 38

premium

Answer 38

is determined by multiplying the rate by the number of units of insurance purchased