3 - Contract & Agency Flashcards
(27 cards)
Define TOBA
Terms of Business Agreement
Define Consideration?
What is the difference between a principal and an agent?
In law an agent is one who is authorised by a principal, to bring that principal into a contractual relationship with another third party.
(41) What form of consideration is a principal most likely to provide to an agent as part of their terms of agreement?
A. Access to the insurer’s rating database.
B. Commission on premium received.
C. Delegated authority to grant cover.
D. The insurer’s pre-printed documentation and stationery.
(31) What element of an insurance contract is likely to be affected by purchasing insurance direct from a UK insurer?
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A. The amount of Insurance Premium Tax payable
B. The complaints process
C. The premium payable
D. The protection should the insurer fail
Define Ratification?
Where an agent acts without authority, but the principal accepts the act as having been done by the agent on their behalf.
(3) Katie is selling her car for £2,000. May offers her £1,800, which Katie refuses. Legally, a contract has not been formed between Katie and May because:
Self test questions
a. Katie’s refusal of the counter-offer acts as a withdrawal of the original offer
b. Katie and May did not sign a contract
c. May’s counter-offer acts as a rejection of the original offer
d. May offered less than Katie was prepared to accept
(33) What is meant by consideration in the context of a valid contract between two parties?
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A. Each party’s duty to act fairly towards the other.
B. Each party’s duty to act with good faith.
C. Each party’s legal capacity to enter into the contract.
D. Each party’s side of the bargain which supports the contract.
(2) Sanjeev requires house insurance. He has spoken to an insurer over the telephone who has offered him a policy with an excess of £500. Sanjeev accepts the policy but requests an excess of £250. In contract terms, Sanjeev’s acceptance represents:
Self test questions
a. A counter-offer
b. An offer
c. Unconditional acceptance
d. Agreement
(34) Corrine offers to supply filing cabinets to Debra, who accepts the offer. What further action is required in order that a legally enforceable contract exists between them?
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A. Another person needs to witness the agreement
B. Debra needs to agree to pay Corrine for the filing cabinets
C. The filing cabinets need to be delivered to Debra
D. The terms of the agreement need to be written down
(4) Colin buys home contents insurance, having received a quote through the post which he is happy with. Acceptance of the quote will be complete when:
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a. A letter of acceptance is received.
b. A letter of acceptance is posted.
c. The policy is put on risk.
d. Colin receives confirmation from the insurer.
(35) Who may terminate a private medical insurance contract?
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A. The insured only.
B. The insured’s general practitioner (GP) or medical consultant.
C. The insurer only.
D. Both the insured and insurer
(5) Within insurance, consideration will typically be the:
Self test questions
a. Value of the claim paid by the insurer.
b. Disclosure of all relevant facts at the outset by the insured.
c. Initial terms for the insurance issued by the insurer.
d. Premium paid by the insured.
(36) If an insured has paid a premium to an agent authorised by the insurer to collect premiums on its behalf and the agent then fails to pass on the premium to the insurer, what is the legal situation?
iF1 2023 Exam
A. The insured is not covered until such time as the premium is paid to the insurer.
B. The insured must pay a pro rata premium directly to the insurer to ensure cover continues.
C. The insurer is deemed to have received the premium and the insured is fully covered.
D. The premium will be paid to the insurer out of a central fund set up for that purpose.
(1) A valid contract must include:
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a. Signed documentation
b. A written offer
c. A legal disclaimer
d. Consideration
(37) An individual to whom an offer has been made, tells the individual making the offer that she is willing to accept it if some changes are made. Under contract law, this is known as
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A. conditional acceptance.
B. implied acceptance.
C. invitation to treat.
D. unilateral contract.
(6) Joe and Maggie have been told that their insurance policy doesn’t have a right to cancel. What type of policy is it?
Self test questions
a. Travel insurance with a term of less than a month.
b. Motor insurance with a term of less than a month.
c. Payment protection insurance.
d. Critical illness insurance.
(38) What, if anything, should be stated in respect of commission in a Terms of Business Agreement between an insurer and an intermediary?
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A. No reference to commission is required.
B. Reference only needs to be made to commission if the rate is more than normal market levels.
C. The amount of commission does not need to be shown, but the classes of insurance it is payable on must be identified.
D. The rate of commission and when it becomes payable.
(7) Tolu has buildings insurance but has not adhered to a warranty on the policy. In the event of a claim, the insurer would:
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a. Be able to avoid the claim and cancel the policy from the outset.
b. Be liable but would be able to only pay a set proportion of the claim.
c. Not be liable for claims resulting from this, but will be liable for losses occurringafter a breach has been remedied.
d. Be able to make a discretionary payment of an amount it feels is reasonable.
(40) Where an agent collects premiums on behalf of a principal, the agent is obliged to
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A. issue monthly bank statements to the principal.
B. keep the principal’s money separate from the agent’s money.
C. separate the Insurance Premium Tax from the premium received.
D. provide written receipts for premiums received.
(8) If an independent intermediary completes a property survey for an insurer, they would be considered to be a(n):
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a. Principal for the insurer.
b. Principal for the property owner.
c. Agent for the property owner.
d. Agent for the insurer
(39) Where a principal agrees to honour the obligations of an unauthorised act conducted by an agent, this is an agency created by
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A. apparent authority.
B. consent.
C. necessity.
D. ratification.
(9) Firdale Insurance Ltd has asked one of its agents to carry out a property survey 50 miles away. The agent carries out the survey and charges the mileage costs back to the insurer. The costs will be met because:
Self test questions
a. The agent has implied authority.
b. Agency agreements always allow for mileage costs.
c. The agent has limited authority.
d. The principal is always liable for the actions of their agent.
(10) All agency agreements should:
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a. Set out the requirements and responsibilities for just the agent.
b. Define and allocate the responsibilities and rights of each party.
c. Set out the requirements and responsibilities for just the principal
d. Set out the broad principles and conduct requirements that each party will be subject to.
