CPCU 530- Applying Legal Concepts to Insurance Study Questions with Correct Answers

-Agreement (which includes the offer and acceptance) The first essential ingredient of a legally binding contract is a valid agreement between the offeror and the offeree 4) Undue influence—The improper use of power or trust to deprive a person of free will and to substitute that person's objective with someone else's can remove the possibility of genuine assent. For example, an attorney gives advice to a client that benefits the attorney rather than ensures the best possible outcome for the client. 5) Innocent misrepresentation—Often, innocent misrepresentation will look like fraud, in that important facts are incorrectly portrayed. The difference between fraud and innocent misrepresentation is that while the latter can lead to a contract being voided, monetary damages are not awarded for it. Q) Which one of the following elements must exist in order to prove fraud? A) The intent of the representation was to influence or deceive. Types of Contracts Bilateral contract- A contract in which each party promises a performance Unilateral Contract- A contract in which only one party makes a promise or undertakes the requested performance (Insurance). Executed contract- A contract that has been completely performed by both parties Executory Contracts- A contract that has not been completely performed by one or both of the parties. Express Contracts- A contract whose terms and intentions are explicitly stated. Implied Contracts- A contract whose terms and intentions are indicated by the actions of the parties to the contract and the surrounding circumstances. Voidable and Void Contracts- A voidable contract is a valid contract that can continue in force, and the parties can execute it completely unless an innocent or injured party chooses to avoid it. The behavior of one of the contracting parties, such as an act of fraud or illegal deceit, can also make a contract voidable. Q) Miguel seeks to insure his personal auto to comply with state regulations. He contacts an insurance agent who provides Miguel with a personal auto policy with Atlas Motorist Insurance Company ("Atlas"). Which one of the following best describes the contractual relationship between Miguel and Atlas?