CPCU 530 PRACTICE TEST QUESTIONS
WITH ALL CORRECT ANSWERS
A contract of sale for real property usually includes which one of the following
elements? - Answer-Nonessential terms. Certain terms are nonessential but are usually
covered in a complete contract of sale, such as time of closing and payment terms.
Tanya leased a building for use as a restaurant. In the process, she purchased and
installed a removable pizza oven. At the end of the lease, Tanya's landlord told her the
pizza oven was a property alteration because it was attached to real property and must
stay with the building. In this situation the pizza oven is - Answer-This is a trade fixture
since Tanya can remove it. If it was an alteration or improvement or betterment it would
become part of the leased structure.
Which one of the following is the primary benefit that the doctrine of res ipsa loquitur
offers plaintiffs? - Answer-The doctrine permits an inference of negligence if the action
causing injury was under the defendant's exclusive control and the probability that under
the given circumstances the defendant was negligent.
In terms of landowners' duties to people on their property, which one of the following is
the best definition of a licensee? - Answer-A person with express or implied permission
to enter onto the land for his or her own purpose, generally owed no duty of safety. The
definition of a licensee is a person with express or implied permission to enter onto the
land for his or her own purpose, generally owed no duty of safety.
A defense to libel or slander is the defendant's absolute privilege. Absolute privilege
applies to which one of the following areas? - Answer-If an injured party consents to
publication of defamatory material, absolute privilege applies.
Environmental law deals with the maintenance and protection of the environment and
includes measures to - Answer-Prevent environmental damage.
One of the ways to terminate agency is changed circumstances. Which one of the
following is an example of changed circumstances? - Answer-Bankruptcy. A principal's
bankruptcy is an example of changed circumstances that usually terminates the agent's
authority regarding all assets under a bankruptcy court's control.
An employee of the Ralson Hotel used a pass key to enter a guest's room and
physically attack her. What is an element that must be present in order for Ralson to be
,vicariously liable? - Answer-The employee must have committed the wrongful act within
the scope of his employment.
When undisclosed principals are involved, their rights against third parties can be
limited in four situations. Which one of the following is one of these situations? -
Answer-Greater burden on the third party. An undisclosed principal also cannot enforce
a contract against a third party if enforcement would impose a substantial additional
burden on the third party.
Filip is a member of the Halbinger Corporation's Board of Directors. At a recent
director's meeting, Filip and the other Halbinger directors learned that in the upcoming
quarter, Halbinger would introduce a new product that would dramatically increase its
profits. Filip bought a substantial amount of Halbinger stock the next day, based on this
information. Filip's purchase was - Answer-Improper, because Filip bought this stock
based on insider information. Officers and directors may not purchase their
corporation's stock based on inside material information that is not available to the
public—insider information. Filip bought stock based on this information and this is
improper insider stock trading.
The Richley Corporation elected to sell all of its assets in return for shares of stock in
the Worthley Corporation. By taking this action, the Richley Corporation has completed
which one of the following types of mergers? - Answer-De facto merger. A way to
complete a merger is for a corporation to sell all or most of its shares in return for the
purchaser's shares. This transaction constitutes a merger in fact, if not in law, and is
called a de facto merger. A takeover is an assumption of control by one company over
another. In a share exchange, a corporation acquires all of another corporation's
outstanding stock in return for shares of the acquiring corporation. A tender offer is an
offer to another corporation's shares to purchase their stock.
Which one of the following best describes the relationship between the controlling
political party and the country's legal system in most socialist-communist countries? -
Answer-In a socialist-communist country, the leading political party controls and
influences the entire legal system, and decisions from the courts, although independent
in nature, are subject to party control or revision.
Which one of the following best summarizes why government structure is important to
consider in international business dealings? - Answer-Knowledge of a particular
governmental system establishes a norm on which a businessperson can rely, while
changes to that system can result in changes to the business and legal environment
within a country.
The Model State Administrative Procedure Act requires a public hearing for certain
proposed agency regulations under which one of the following situations? - Answer-
Public hearings are only required if a governmental agency or 25 individuals request it,
and speaking at the hearings is limited by the hearing examiner's discretion, the
controversy of the regulation, and the number of people present.
,Is there any way that an offeree can accept a rejected offer to contract? - Answer-No, a
rejected offer is terminated and any attempt to accept the rejected offer is considered a
new offer.
Betty plans to purchase a cottage near a beach. She makes an offer to Steve, the
realtor for the seller, on June 1, and Steve indicates the acceptance will come to Betty
in the mail. The seller orally tells Steve to accept Betty's offer on June 2, and on June 4
Steve draws up the acceptance papers and has them signed by the seller. He mails the
acceptance to Betty on June 5, and she receives it on June 7. In terms of contract
formation, the acceptance of Betty's offer is effective on June - Answer-Even though the
offer is acceptable to the seller on June 2, the acceptance is effective on June 5
because when acceptance by mail is an approved means of response to an offer, the
acceptance is effective when it is mailed.
Upon his death, Vince owed his friend Phil $5,000. Al, the executor of Vince's estate,
orally promises to pay Phil the $5,000 from his own personal funds. If Al does not pay
Phil the $5,000, Phil - Answer-This is not a binding commitment because Al and Phil did
not put their agreement in writing. Phil cannot collect from Al, not because it is not his
debt but because the agreement is not in writing as it should be under the statute of
frauds.
Country X contracted with Country Y to supply a certain quantity of an alternative fuel.
Because of local crop failures, the fuel prices became cost prohibitive, and Country X
attempted to discharge the contract. Country X's inability to provide Country Y with the
alternative fuel in this situation is an example of - Answer-The reason Country X could
not provide Country Y with the alternative fuel because of commercial impracticability
and not because of frustration of purpose, lack of accord and satisfaction, or inability to
provide substantial performance.
Furkan, who was insured with Argot Insurance Company, ran a stop sign and hit Katie,
injuring her severely. Katie sued Furkan and Argot Insurance Company jointly. This
action is known as - Answer-A law that permits a negligence victim to sue an insurer
directly or to sue both the insurer and wrongdoer, is known as a direct-action statute.
Which one of the following is a common provision in state statutes relating to the effect
of an insured's breach of warranty? - Answer-Only substantial compliance with a
warranty is necessary. State statutes generally lessen the effect of warranties. Some
require intent to deceive or increase in risk in order to defeat or avoid a policy. Others
prevent insurers from specifying that representations have the same effect as
warranties. And some state that only substantial compliance with a warranty is
necessary.
An insurer should attempt to enter into a nonwaiver agreement with the insured -
Answer-As soon as the potential coverage question surfaces.
, Which one of the following terms applies when goods are loaded on board a vessel at
the seller's risk and expense and then ownership passes to the buyer? - Answer-FOB
vessel
Checks are the most familiar negotiable instruments. Which one of the following is a
common check transaction? - Answer-Failure to honor checks. A bank liable for all
damages caused by its failure to honor a check when the depositor's account contains
sufficient funds.
Which one of the following best explains why the law of secured transactions is relevant
to the sale of goods? - Answer-In order to purchase goods, buyers often use open credit
granted by the seller or a third party, and such creditors frequently require the buyer to
give them a security interest in the goods sold.
V-Insurance Co., located in Vermont, instructed its employees to sell term life insurance
policies by any means necessary. Under the company's instructions, insurance
producers were required to tell potential customers that they had to purchase a term life
policy in order to qualify for other policies, such as homeowners insurance. Similarly,
claim representatives offered to stop investigations if insureds agreed to purchase term
life policies. By using these aggressive methods, V-Insurance Co. essentially stamped
out all competition in Vermont. Vermont's unfair trade practices act follows the National
Association of Insurance Commissioners' model Insurance Fair Trade Practices Act.
Which one of the following choices correctly identifies the law or laws that prohibit V-
Insurance Co.'s trade practices? - Answer-Vermont's unfair trade practices acts and
federal antitrust laws
Janice told her friend Beth that she would give Beth a yellow antique chest when Beth
had her first baby. Two years later, Beth gave birth to a son and remodeled a bedroom
into a nursery to match the antique chest. However, Janice said she no longer wanted
to give Beth the chest. The objective manifestation of Janice's intent to give Beth the
chest is illustrated in - Answer-The objective manifestation of Janice's intent is based on
what others might interpret as her intent according to her statements and actions.
Louis owns an island with a small cottage on it. He has full ownership of the property
and an unconditional right to sell it or otherwise dispose of it. Louis has - Answer-A fee
simple estate. A tenancy by the entirety is between husband and wife. A life estate does
qualify as a fee simple, ownership situation since the property passes on to remainder
men interests.
Which one of the following best describes equity courts in the United States federal
judicial system? - Answer-Modern equity courts in the U.S. federal system are unified
with courts of law. Judges, not juries, can use the broad powers of equity to create fair
solutions beyond what traditional legal remedies can offer.
WITH ALL CORRECT ANSWERS
A contract of sale for real property usually includes which one of the following
elements? - Answer-Nonessential terms. Certain terms are nonessential but are usually
covered in a complete contract of sale, such as time of closing and payment terms.
Tanya leased a building for use as a restaurant. In the process, she purchased and
installed a removable pizza oven. At the end of the lease, Tanya's landlord told her the
pizza oven was a property alteration because it was attached to real property and must
stay with the building. In this situation the pizza oven is - Answer-This is a trade fixture
since Tanya can remove it. If it was an alteration or improvement or betterment it would
become part of the leased structure.
Which one of the following is the primary benefit that the doctrine of res ipsa loquitur
offers plaintiffs? - Answer-The doctrine permits an inference of negligence if the action
causing injury was under the defendant's exclusive control and the probability that under
the given circumstances the defendant was negligent.
In terms of landowners' duties to people on their property, which one of the following is
the best definition of a licensee? - Answer-A person with express or implied permission
to enter onto the land for his or her own purpose, generally owed no duty of safety. The
definition of a licensee is a person with express or implied permission to enter onto the
land for his or her own purpose, generally owed no duty of safety.
A defense to libel or slander is the defendant's absolute privilege. Absolute privilege
applies to which one of the following areas? - Answer-If an injured party consents to
publication of defamatory material, absolute privilege applies.
Environmental law deals with the maintenance and protection of the environment and
includes measures to - Answer-Prevent environmental damage.
One of the ways to terminate agency is changed circumstances. Which one of the
following is an example of changed circumstances? - Answer-Bankruptcy. A principal's
bankruptcy is an example of changed circumstances that usually terminates the agent's
authority regarding all assets under a bankruptcy court's control.
An employee of the Ralson Hotel used a pass key to enter a guest's room and
physically attack her. What is an element that must be present in order for Ralson to be
,vicariously liable? - Answer-The employee must have committed the wrongful act within
the scope of his employment.
When undisclosed principals are involved, their rights against third parties can be
limited in four situations. Which one of the following is one of these situations? -
Answer-Greater burden on the third party. An undisclosed principal also cannot enforce
a contract against a third party if enforcement would impose a substantial additional
burden on the third party.
Filip is a member of the Halbinger Corporation's Board of Directors. At a recent
director's meeting, Filip and the other Halbinger directors learned that in the upcoming
quarter, Halbinger would introduce a new product that would dramatically increase its
profits. Filip bought a substantial amount of Halbinger stock the next day, based on this
information. Filip's purchase was - Answer-Improper, because Filip bought this stock
based on insider information. Officers and directors may not purchase their
corporation's stock based on inside material information that is not available to the
public—insider information. Filip bought stock based on this information and this is
improper insider stock trading.
The Richley Corporation elected to sell all of its assets in return for shares of stock in
the Worthley Corporation. By taking this action, the Richley Corporation has completed
which one of the following types of mergers? - Answer-De facto merger. A way to
complete a merger is for a corporation to sell all or most of its shares in return for the
purchaser's shares. This transaction constitutes a merger in fact, if not in law, and is
called a de facto merger. A takeover is an assumption of control by one company over
another. In a share exchange, a corporation acquires all of another corporation's
outstanding stock in return for shares of the acquiring corporation. A tender offer is an
offer to another corporation's shares to purchase their stock.
Which one of the following best describes the relationship between the controlling
political party and the country's legal system in most socialist-communist countries? -
Answer-In a socialist-communist country, the leading political party controls and
influences the entire legal system, and decisions from the courts, although independent
in nature, are subject to party control or revision.
Which one of the following best summarizes why government structure is important to
consider in international business dealings? - Answer-Knowledge of a particular
governmental system establishes a norm on which a businessperson can rely, while
changes to that system can result in changes to the business and legal environment
within a country.
The Model State Administrative Procedure Act requires a public hearing for certain
proposed agency regulations under which one of the following situations? - Answer-
Public hearings are only required if a governmental agency or 25 individuals request it,
and speaking at the hearings is limited by the hearing examiner's discretion, the
controversy of the regulation, and the number of people present.
,Is there any way that an offeree can accept a rejected offer to contract? - Answer-No, a
rejected offer is terminated and any attempt to accept the rejected offer is considered a
new offer.
Betty plans to purchase a cottage near a beach. She makes an offer to Steve, the
realtor for the seller, on June 1, and Steve indicates the acceptance will come to Betty
in the mail. The seller orally tells Steve to accept Betty's offer on June 2, and on June 4
Steve draws up the acceptance papers and has them signed by the seller. He mails the
acceptance to Betty on June 5, and she receives it on June 7. In terms of contract
formation, the acceptance of Betty's offer is effective on June - Answer-Even though the
offer is acceptable to the seller on June 2, the acceptance is effective on June 5
because when acceptance by mail is an approved means of response to an offer, the
acceptance is effective when it is mailed.
Upon his death, Vince owed his friend Phil $5,000. Al, the executor of Vince's estate,
orally promises to pay Phil the $5,000 from his own personal funds. If Al does not pay
Phil the $5,000, Phil - Answer-This is not a binding commitment because Al and Phil did
not put their agreement in writing. Phil cannot collect from Al, not because it is not his
debt but because the agreement is not in writing as it should be under the statute of
frauds.
Country X contracted with Country Y to supply a certain quantity of an alternative fuel.
Because of local crop failures, the fuel prices became cost prohibitive, and Country X
attempted to discharge the contract. Country X's inability to provide Country Y with the
alternative fuel in this situation is an example of - Answer-The reason Country X could
not provide Country Y with the alternative fuel because of commercial impracticability
and not because of frustration of purpose, lack of accord and satisfaction, or inability to
provide substantial performance.
Furkan, who was insured with Argot Insurance Company, ran a stop sign and hit Katie,
injuring her severely. Katie sued Furkan and Argot Insurance Company jointly. This
action is known as - Answer-A law that permits a negligence victim to sue an insurer
directly or to sue both the insurer and wrongdoer, is known as a direct-action statute.
Which one of the following is a common provision in state statutes relating to the effect
of an insured's breach of warranty? - Answer-Only substantial compliance with a
warranty is necessary. State statutes generally lessen the effect of warranties. Some
require intent to deceive or increase in risk in order to defeat or avoid a policy. Others
prevent insurers from specifying that representations have the same effect as
warranties. And some state that only substantial compliance with a warranty is
necessary.
An insurer should attempt to enter into a nonwaiver agreement with the insured -
Answer-As soon as the potential coverage question surfaces.
, Which one of the following terms applies when goods are loaded on board a vessel at
the seller's risk and expense and then ownership passes to the buyer? - Answer-FOB
vessel
Checks are the most familiar negotiable instruments. Which one of the following is a
common check transaction? - Answer-Failure to honor checks. A bank liable for all
damages caused by its failure to honor a check when the depositor's account contains
sufficient funds.
Which one of the following best explains why the law of secured transactions is relevant
to the sale of goods? - Answer-In order to purchase goods, buyers often use open credit
granted by the seller or a third party, and such creditors frequently require the buyer to
give them a security interest in the goods sold.
V-Insurance Co., located in Vermont, instructed its employees to sell term life insurance
policies by any means necessary. Under the company's instructions, insurance
producers were required to tell potential customers that they had to purchase a term life
policy in order to qualify for other policies, such as homeowners insurance. Similarly,
claim representatives offered to stop investigations if insureds agreed to purchase term
life policies. By using these aggressive methods, V-Insurance Co. essentially stamped
out all competition in Vermont. Vermont's unfair trade practices act follows the National
Association of Insurance Commissioners' model Insurance Fair Trade Practices Act.
Which one of the following choices correctly identifies the law or laws that prohibit V-
Insurance Co.'s trade practices? - Answer-Vermont's unfair trade practices acts and
federal antitrust laws
Janice told her friend Beth that she would give Beth a yellow antique chest when Beth
had her first baby. Two years later, Beth gave birth to a son and remodeled a bedroom
into a nursery to match the antique chest. However, Janice said she no longer wanted
to give Beth the chest. The objective manifestation of Janice's intent to give Beth the
chest is illustrated in - Answer-The objective manifestation of Janice's intent is based on
what others might interpret as her intent according to her statements and actions.
Louis owns an island with a small cottage on it. He has full ownership of the property
and an unconditional right to sell it or otherwise dispose of it. Louis has - Answer-A fee
simple estate. A tenancy by the entirety is between husband and wife. A life estate does
qualify as a fee simple, ownership situation since the property passes on to remainder
men interests.
Which one of the following best describes equity courts in the United States federal
judicial system? - Answer-Modern equity courts in the U.S. federal system are unified
with courts of law. Judges, not juries, can use the broad powers of equity to create fair
solutions beyond what traditional legal remedies can offer.
