Flashcards in Chapter 3 Deck (20):
define a contract
a legally enforceable agreement between two or more parties. This means the parties are bound to the promises they made.
> Insurance policy is a contract, and describes the terms of the agreement.
what make s a contract valid?
a contract that is enforceable at law because it satisfies all legal requirements.
what is a void contract?
a contract that does not meet one or more of the legal requirements to create a valid contract, and thus is never enforceable
what is a voidable contract?
a contract under which on party has the right to avoid his obligations under the contract.
what makes a contract formal?
its enforceable becuase the parties met certain formalities concerning the form of the agreement. it must be in writing and contain some form of seal
> land contracts
What makes a contract informal?
enforceable because the parties to the contract met requirements concerning the substance of the agreement rather than requirements concern the form of the agreement.
> most insurance contracts
what are the 4 requirements for an informal contract?
1. parties must express mutual assent, to the terms of the contract
2. parties must exchange legally adequate consideration
3. the contract must be for a lawful purpose
4. parites must have contractual capacity.
define mutual assent [agreement].
meeting of the minds about the terms of the agreement.
> its expressed by means of an offer and an acceptance. All paties must clearly indicate that hey intend to be bound by the terms.
define legal adequate consideration
this is required for an informal contract to be valid. This means that each part must give or promise something of value to the other party
what is mean by lawful purpose?
an insurable interest be present when a policy is issued and provides assurance that a life insurance contract is being made for a lawful purpose.
in most jurisdictions, who are the majority of people who have limited contractual capacity?
2) lack mental capacity
define the two situations that can arise in which a person;s lack of mental capacity affects her contractual capacity.
1) court declares the person to be insane or mentally incompetent.
2) the person's mental competence is impaired, but had not been declared insane or mentally incompetent by a court. (intoxicated or impaired)
what is a bilateral contract
where both parties make legally enforceable promises when they enter into the contract.
what type of contract [name] requires only one party to make a legally enforceable promise when entering into the contract
What type of contract is an insurance policy? [bilateral vs. unilateral]
what is a commutative contract?
An agreement under which the parties specifically in advance the values that they will exchange.
- they tend to exchange items or services that they think are relatively equal value
what is an aleatory contract?
contract under which one party provides something of value to another party in exchange for a conditional promise.
what is a conditional promise?
a promise to preform a stated act if a specified, uncertain event occurs.
is an insurance contract a commutative contract or an aleatory contract?
aleatory - the promise to pay the policy benefits is specified in advance and is contingent on the death of the insured