AIC 301 LATEST EVALUATION EXAMS TEST
QUESTIONS AND ANSWERS SURE A+
✔✔contracts must be in a proper, legally stipulated form to be binding - ✔✔form
✔✔violation of the agreement that would justify a nonbreaching party's termination of
the contract - ✔✔material breach
✔✔allows the nonbreaching party to sue the breaching party for damages - ✔✔material
breach
✔✔when there is substantial performance of the contract by the party accused of a
breach - ✔✔immaterial breach
✔✔3 circumstances affecting materiality of a breach - ✔✔1) extent to which the
breaching party has performed
2) willfulness of the breach
3) extent to which the nonbreaching party has obtained benefits and can receive
adequate compensation
✔✔a payment awarded by a court to reimburse a victim for actual harm -
✔✔compensatory damages
,✔✔a payment awarded by a court to indemnify an injured party for losses that result
indirectly from a wrong such as a breach of contract or a tort - ✔✔consequential
damages
✔✔can only be recovered by the plaintiff when the defendant was aware of the probably
occurence of the damage - ✔✔consequential damages
✔✔a payment awarded by a court to punish a defendant for a reckless, malicious, or
deceitful act to deter similar conduct - ✔✔punitive (exemplary) damages
✔✔a payment awarded by a court that exceeds the usual contract damages for a
breach of contract - ✔✔extracontractual damages
✔✔also called "excess damages" and "excess-liability damages" - ✔✔extracontractual
damages
✔✔a duty owed by an injured party to a claim to take reasonable measures to minimize
or avoid additional injury or damages - ✔✔mitigation of damages
✔✔a reasonable estimation of actual damages, agreed to by contracting parties and
included in the contract, to be paid in the event of a breach or for negligence -
✔✔liquidated damages
✔✔5 examples of equitable remedies - ✔✔1) goods have been accepted by the buyer
2) goods have been delivered to a carrier
3) goods are held by a third party for delivery without being moved
4) the buyer has been given a document indicating their rights to the goods
5) the 3rd party acknowledges the buyer's right to possession
✔✔a court-ordered equitable remedy requiring a party to perform a certain act as a
result of breach of contract - ✔✔specific performance
✔✔usually ordered when money damages would be inappropriate or inadequate -
✔✔specific performance
✔✔a court-ordered equitable remedy requiring a party to act or refrain from acting -
✔✔injunction
✔✔6 special characteristics of insurance contracts - ✔✔1) conditional contract
2) contract involving fortuitous events & exchange of unequal amounts
3) contract of utmost good faith
4) contract of adhesion
5) contract of indemnity
,6) nontransferable contract
✔✔contract that one or more parties must perform only under certain conditions -
✔✔conditional contract
✔✔4 elements of a legally enforceable contract - ✔✔1) agreement
2) capacity to contract
3) consideration
4) legal purpose
✔✔in insurance contracts, the possibility that the insurer's obligation may be
____________ _______________ than the insured's makes the transaction a fair trade
- ✔✔much greater
✔✔premiums for insureds should reflect the insured's share of _________________
__________________ - ✔✔estimated losses
✔✔an obligation to act in complete honesty and to disclose all relevant facts -
✔✔utmost good faith
✔✔an intentional failure to disclose material fact - ✔✔concealment
✔✔2 requirements of concealment - ✔✔1) intentional
2) material fact
✔✔a fact that is significant to a matter at hand - ✔✔material fact
✔✔Ex. use of applicant's autos, identity of drivers, ages & driving records of drivers (are
examples of what?) - ✔✔material fact
✔✔a false statement of a material fact on which a party relies - ✔✔misrepresentation
✔✔for misrepresentation, insurers do not have to prove that misrepresentation was
___________________ - ✔✔intentional
✔✔a clause that states the insurer cannot contest the policy after it has been in force for
a specified period, such as 2 years, during the insured's lifetime - ✔✔incontestable
clause
✔✔a period during which an insurer can challenge the validity of a life insurance policy -
✔✔contestable period
, ✔✔any contract in which one party is put in a "take-it-or-leave-it" position and must
either accept the contract as written by the other party or reject the contract entirely -
✔✔contracts of adhesion
✔✔if policy wording is ambiguous, a court will generally apply the interpretation that
favors the insured - ✔✔contra proferentem
✔✔a contract in which the insurer agrees in the event of a covered loss, to pay an
amount directly related to the amount of the loss - ✔✔contracts of indemnity
✔✔the principle that insurance policies should provide a benefit no greater than the loss
suffered by an insured - ✔✔principle of indemnity
✔✔a policy in which the insurer pays a stated amount in the event of a specified loss
regardless of the actual value of the loss - ✔✔valued policies
✔✔most insurance policies contain a provision that requires insurer's ______________
_________________ for an insured to transfer a policy to another party - ✔✔written
permission
✔✔3 characteristics of a binding insurance contract - ✔✔1) agreement
2) policy content
3) delivery
✔✔2 main components of an agreement - ✔✔1) offer made by one party
2) offer accepted by another party
✔✔a temporary oral or written agreement to provide insurance coverage until a formal
written policy is issued - ✔✔binders
✔✔some parties try to use another party's _____________ or ______________
_________________ as evidence of agreement - ✔✔silence; slow movement
✔✔_____________ contracts are valid but not preferred - ✔✔oral
✔✔5 components of an agreement - ✔✔1) types of coverage sought
2) object or premises
3) amount of insurance
4) insured's name
5) duration of coverage
✔✔provides most accurate bases for determining implied terms of insurance contract -
✔✔previous dealings between parties
QUESTIONS AND ANSWERS SURE A+
✔✔contracts must be in a proper, legally stipulated form to be binding - ✔✔form
✔✔violation of the agreement that would justify a nonbreaching party's termination of
the contract - ✔✔material breach
✔✔allows the nonbreaching party to sue the breaching party for damages - ✔✔material
breach
✔✔when there is substantial performance of the contract by the party accused of a
breach - ✔✔immaterial breach
✔✔3 circumstances affecting materiality of a breach - ✔✔1) extent to which the
breaching party has performed
2) willfulness of the breach
3) extent to which the nonbreaching party has obtained benefits and can receive
adequate compensation
✔✔a payment awarded by a court to reimburse a victim for actual harm -
✔✔compensatory damages
,✔✔a payment awarded by a court to indemnify an injured party for losses that result
indirectly from a wrong such as a breach of contract or a tort - ✔✔consequential
damages
✔✔can only be recovered by the plaintiff when the defendant was aware of the probably
occurence of the damage - ✔✔consequential damages
✔✔a payment awarded by a court to punish a defendant for a reckless, malicious, or
deceitful act to deter similar conduct - ✔✔punitive (exemplary) damages
✔✔a payment awarded by a court that exceeds the usual contract damages for a
breach of contract - ✔✔extracontractual damages
✔✔also called "excess damages" and "excess-liability damages" - ✔✔extracontractual
damages
✔✔a duty owed by an injured party to a claim to take reasonable measures to minimize
or avoid additional injury or damages - ✔✔mitigation of damages
✔✔a reasonable estimation of actual damages, agreed to by contracting parties and
included in the contract, to be paid in the event of a breach or for negligence -
✔✔liquidated damages
✔✔5 examples of equitable remedies - ✔✔1) goods have been accepted by the buyer
2) goods have been delivered to a carrier
3) goods are held by a third party for delivery without being moved
4) the buyer has been given a document indicating their rights to the goods
5) the 3rd party acknowledges the buyer's right to possession
✔✔a court-ordered equitable remedy requiring a party to perform a certain act as a
result of breach of contract - ✔✔specific performance
✔✔usually ordered when money damages would be inappropriate or inadequate -
✔✔specific performance
✔✔a court-ordered equitable remedy requiring a party to act or refrain from acting -
✔✔injunction
✔✔6 special characteristics of insurance contracts - ✔✔1) conditional contract
2) contract involving fortuitous events & exchange of unequal amounts
3) contract of utmost good faith
4) contract of adhesion
5) contract of indemnity
,6) nontransferable contract
✔✔contract that one or more parties must perform only under certain conditions -
✔✔conditional contract
✔✔4 elements of a legally enforceable contract - ✔✔1) agreement
2) capacity to contract
3) consideration
4) legal purpose
✔✔in insurance contracts, the possibility that the insurer's obligation may be
____________ _______________ than the insured's makes the transaction a fair trade
- ✔✔much greater
✔✔premiums for insureds should reflect the insured's share of _________________
__________________ - ✔✔estimated losses
✔✔an obligation to act in complete honesty and to disclose all relevant facts -
✔✔utmost good faith
✔✔an intentional failure to disclose material fact - ✔✔concealment
✔✔2 requirements of concealment - ✔✔1) intentional
2) material fact
✔✔a fact that is significant to a matter at hand - ✔✔material fact
✔✔Ex. use of applicant's autos, identity of drivers, ages & driving records of drivers (are
examples of what?) - ✔✔material fact
✔✔a false statement of a material fact on which a party relies - ✔✔misrepresentation
✔✔for misrepresentation, insurers do not have to prove that misrepresentation was
___________________ - ✔✔intentional
✔✔a clause that states the insurer cannot contest the policy after it has been in force for
a specified period, such as 2 years, during the insured's lifetime - ✔✔incontestable
clause
✔✔a period during which an insurer can challenge the validity of a life insurance policy -
✔✔contestable period
, ✔✔any contract in which one party is put in a "take-it-or-leave-it" position and must
either accept the contract as written by the other party or reject the contract entirely -
✔✔contracts of adhesion
✔✔if policy wording is ambiguous, a court will generally apply the interpretation that
favors the insured - ✔✔contra proferentem
✔✔a contract in which the insurer agrees in the event of a covered loss, to pay an
amount directly related to the amount of the loss - ✔✔contracts of indemnity
✔✔the principle that insurance policies should provide a benefit no greater than the loss
suffered by an insured - ✔✔principle of indemnity
✔✔a policy in which the insurer pays a stated amount in the event of a specified loss
regardless of the actual value of the loss - ✔✔valued policies
✔✔most insurance policies contain a provision that requires insurer's ______________
_________________ for an insured to transfer a policy to another party - ✔✔written
permission
✔✔3 characteristics of a binding insurance contract - ✔✔1) agreement
2) policy content
3) delivery
✔✔2 main components of an agreement - ✔✔1) offer made by one party
2) offer accepted by another party
✔✔a temporary oral or written agreement to provide insurance coverage until a formal
written policy is issued - ✔✔binders
✔✔some parties try to use another party's _____________ or ______________
_________________ as evidence of agreement - ✔✔silence; slow movement
✔✔_____________ contracts are valid but not preferred - ✔✔oral
✔✔5 components of an agreement - ✔✔1) types of coverage sought
2) object or premises
3) amount of insurance
4) insured's name
5) duration of coverage
✔✔provides most accurate bases for determining implied terms of insurance contract -
✔✔previous dealings between parties
