Contracts

Question 1

Tort Law

Answer 1

Torts are civil wrongs; they’re not crimes or breaches of contract. They result in injuries or harm that constitute the basis of a claim by a third party.

Question 2

Contract Law

Answer 2

Pertains to the formation and enforcement of contracts.

Question 3

Hold Harmless Agreement

Answer 3

A contractual agreement that transfers the liability of one party to another party; it is used by landlords, contractors, and others as a way to avoid or reduce risk.

Question 4

Reasonable Expectations Doctrine

Answer 4

What a reasonable and prudent policyowner would expect; the reasonable expectations of policyowners are honored by the Courts although the strict terms of the policy may not support these expectations.

Question 5

elements of legal contracts

Answer 5

competent parties
legal purpose
offer and acceptance (agreement)
Consideration

Question 6

Indemnity Contract

Answer 6

Pays a specified dollar amount, as stated in the contract, up to the amount of the actual loss. These contracts are considered reimbursement plans

Question 7

Parol Evidence Rule

Answer 7

A written contract may not be altered without the written consent of both parties.

Question 8

Valued contract

Answer 8

A contract that pays a specified amount regardless of the actual loss. A life insurance contract is an example of a valued contract. It has a face value that provides a death benefit in the event of a loss.

Question 9

Subrogation

Answer 9

Occurs when a claim is paid by the insurer who has the contract and the right to take legal action against a negligent third party who may have caused the loss. Life policies have no right of subrogation.

Question 10

Contract of Adhesion –

Answer 10

One party writes the contract, without input from the other party.

Question 11

Aleatory Contract

Answer 11

The exchange of value is unequal. The insured’s premium payment is less than the potential benefit to be received in the event of a loss.

Question 12

Personal Contract –

Answer 12

A contract between the insurance company and an individual.
Personal contracts are specific to the person insured at the time the contract is formed.
The owner and insured cannot be changed without the consent of the insurance company.
A property and casualty insurance contract is personal since it cannot be assigned.
Life insurance is NOT a personal contract.
The policy can be assigned – or a new owner may be named as long as the insurer is notified of the change.

Question 13

Unilateral Contract

Answer 13

Only one party is legally bound to the contractual obligations after the premium is paid to the insurer.

Question 14

Conditional Contract

Answer 14

Both parties must perform certain duties and follow rules of conduct to make the contract enforceab

Question 15

Principle of Indemnity

Answer 15

The insured is restored to the same financial or economic condition that existed prior to the loss, depending on the amount and type of insurance purchased.

Question 16

Utmost Good Faith

Answer 16

Both parties bargain in good faith when forming and entering into the contract. The two parties rely upon the statements and promises of the other and assume no attempt to conceal or deceive has been made.

Question 17

Representations

Answer 17

Statements made by the applicant on the application are considered representations and not warranties. The representations are statements that are believed to be true to the best of the knowledge and belief of the applicant/insured at the time of application.