CPCU 530 FINAL EXAM ACTUAL QUESTIONS AND
ANSWERS GRADED A+
✔✔Ruth told Eric that she will sell her inventory to him for $30,000. Eric responded to
her offer saying, "Your price is ridiculous, but I must have the inventory. Enclosed is a
check for $30,000, but I really think this is unfair." Which one of the following statements
it true regarding whether there has been a legally enforceable acceptance of an offer to
contract?
Select one:
A. There has been valid acceptance, but a court will have to determine Eric's intent.
B. There has been valid acceptance, because complaining has no effect.
C. There has been no acceptance, because an acceptance must be unequivocal.
D. Acceptance cannot be determined, because Eric's protest created a conditional
acceptance. - ✔✔B. There has been valid acceptance, because complaining has no
effect.
✔✔Brenda offered to sell her collection of gemstones to Jolene for $25,000, and Jolene
told her brother Kevin about Brenda's offer. When Jolene died in an auto accident,
Kevin, as executor of Jolene's estate, tried to accept Brenda's offer to sell the collection.
Kevin's acceptance on behalf of the estate is
Select one:
A. Not enforceable because the acceptance must be unconditional and unequivocal.
B. Not enforceable because the offeror has the right to choose with whom to contract.
C. Enforceable because of Brenda's intent to contract with Jolene.
D. Enforceable since Kevin did not deviate from the original terms of the offer. - ✔✔B.
Not enforceable because the offeror has the right to choose with whom to contract.
✔✔Tony got married at age 15, and then divorced only six months later. While still a
minor, Tony was providing child support to his ex-wife. If Tony ceases to provide child
support and his ex-wife sues him, it is likely that Tony
Select one:
A. Will not be required to pay child support until he reaches the age of majority.
B. Will only be required to provide child support based on his age and his income.
C. Will be required to continue to provide child support
D. Will not be obligated to pay because he is still a minor. - ✔✔C. Will be required to
continue to provide child support
✔✔Which one of the following is true regarding the capacity of a minor to contract?
Select one:
A. A minor cannot avoid a contract when he or she misrepresents his or her age.
B. A parent is always liable for a minor child's contract.
C. A minor can challenge a contract and retain the benefits of the contract.
D. A minor must fulfill his or her obligation under a contract for necessaries. - ✔✔D. A
minor must fulfill his or her obligation under a contract for necessaries.
,✔✔Persons claiming insanity may avoid a contract when
Select one:
A. They were experiencing a delusion.
B. The contract is for necessaries.
C. The contract was formed during an interval of time in which two or more independent
third parties are willing to attest to the person's inability to contract.
D. They did not know that a contract was forming or they did not understand the legal
consequences of acts purporting to form the contract. - ✔✔D. They did not know that a
contract was forming or they did not understand the legal consequences of acts
purporting to form the contract.
✔✔Merve filed for bankruptcy a few years ago. One of the debts included in her
bankruptcy was a car loan financed by Lending Bank for $8,000. Which one of the
following correctly describes whether Merve must do anything before Lending Back can
enforce a new promise by Merve to pay this debt and make payments once again on
this contract?
Select one:
A. Merve need provide no additional consideration.
B. Merve must make no additional promises to pay.
C. Merve must acknowledge the debt.
D. Merve must pay additional consideration. - ✔✔A. Merve need provide no additional
consideration.
✔✔Jessica, age 21, promised a 1995 Ford as a gift to her friend, Michelle, age 50.
Which one of the following is the missing element that would make this gift transaction a
contract?
Select one:
A. ConsiderationCorrect. Consideration makes a promise a contract. A promise to make
a gift or to do something without receiving consideration in return is not enforceable. It is
merely a gratuitous promise.
B. Assent
C. Capacity
D. Legal purpose - ✔✔A. Consideration Correct. Consideration makes a promise a
contract. A promise to make a gift or to do something without receiving consideration in
return is not enforceable. It is merely a gratuitous promise.
✔✔Public policy requires that the insured have an insurable interest in any property or
life to be covered by the policy. A person has an insurable interest in property if its
destruction would cause direct monetary loss. In order to be covered, this insurable
interest must exist
Select one:
A. Prior to the loss.
B. When the loss is reported.
C. At the time of loss.
D. When the property is acquired. - ✔✔C. At the time of loss
,✔✔Any contract allowing a lender more than the maximum legal interest is a usury
contract and is therefore illegal. Which one of the following is true in most states if a
lender is charging an illegally high rate of interest on a loan?
Select one:
A. The lender may collect the principal but is fined for usury action equal to the
exorbitant rate of interest previously charged.
B. The lender may collect the principal but is barred from collecting the interest.
C. The lender may not collect either the principal or the lost interest.
D. The lender may collect the principal and the lowest market interest rate. - ✔✔B. The
lender may collect the principal but is barred from collecting the interest.
✔✔Contracts may be illegal because they are against public policy or because they are
contrary to constitutional, statutory, or
Select one:
A. Interstate law.
B. Tort law.
C. Case law.
D. Criminal law. - ✔✔C. Case law.
✔✔Which one of the following is true regarding a void contract?
Select one:
A. A void contract is a contract in which the parties can execute it completely unless an
innocent party chooses to avoid it.
B. A void contract is not legally enforceable or binding.
C. A contract with a minor is always a void contract.
D. A void contract is entered into under fraud or duress. - ✔✔B. A void contract is not
legally enforceable or binding.
✔✔Which one of the following contract types requires each party to perform?
Select one:
A. Unilateral
B. Mutual
C. Implied
D. Bilateral - ✔✔D. Bilateral
✔✔The type of contract that is an obligation imposed by law because of the parties'
conduct or some special relationship between them or because one of them would
otherwise be unjustly enriched is a quasi-contract also known as
Select one:
A. An implied-in-fact contract.
B. An implied-in-law contract.
C. A voidable contract.
D. An executory contract. - ✔✔B. An implied-in-law contract.
, ✔✔The type of contract that has not been completely performed by one or both of the
parties is
Select one:
A. An implied-in-fact contract.
B. A voidable contract.
C. An implied-in-law contract.
D. An executory contract. - ✔✔D. An executory contract.
✔✔Is there any way that an offeree can accept a rejected offer to contract?
Select one:
A. No, the offeree can only invite the offeror to make the original offer again, at which
point the offeree can once again either accept or reject the offer.
B. Yes, provided that the original offer has not yet lapsed.
C. No, a rejected offer is terminated and any attempt to accept the rejected offer is
considered a new offer.
D. Yes, provided that the offeror did not rely on the offeree's rejection. - ✔✔C. No, a
rejected offer is terminated and any attempt to accept the rejected offer is considered a
new offer.
✔✔Which one of the following is the most important factor indicating whether a
communication is an offer?
Select one:
A. The offeror's subjective intent
B. The offeree's objective reaction to the offer
C. The offeree's subjective intent
D. The language that the offeror uses in the offer - ✔✔D. The language that the offeror
uses in the offer
✔✔If the subject matter of an offer is destroyed before acceptance, then the offer
terminates
Select one:
A. Due to a lapse of time, at the moment of destruction.
B. Due to a lack of intent to contract, at the moment the offeror learns of the destruction.
C. Due to the operation of law, at the moment of destruction.
D. Due to indefinite terms, at the moment the offeree learns of the destruction. - ✔✔C.
Due to the operation of law, at the moment of destruction.
✔✔Absent a specific expiration time, which one of the following represents when an
offer ceases to be binding?
Select one:
A. When one year has elapsed after the original offer
B. When a reasonable amount of time passes, based on considerations such as the
contract's subject matter and the general commercial setting
C. When a reasonable amount of time passes, based on how long it would take an
average offeree to accept or reject the offer
ANSWERS GRADED A+
✔✔Ruth told Eric that she will sell her inventory to him for $30,000. Eric responded to
her offer saying, "Your price is ridiculous, but I must have the inventory. Enclosed is a
check for $30,000, but I really think this is unfair." Which one of the following statements
it true regarding whether there has been a legally enforceable acceptance of an offer to
contract?
Select one:
A. There has been valid acceptance, but a court will have to determine Eric's intent.
B. There has been valid acceptance, because complaining has no effect.
C. There has been no acceptance, because an acceptance must be unequivocal.
D. Acceptance cannot be determined, because Eric's protest created a conditional
acceptance. - ✔✔B. There has been valid acceptance, because complaining has no
effect.
✔✔Brenda offered to sell her collection of gemstones to Jolene for $25,000, and Jolene
told her brother Kevin about Brenda's offer. When Jolene died in an auto accident,
Kevin, as executor of Jolene's estate, tried to accept Brenda's offer to sell the collection.
Kevin's acceptance on behalf of the estate is
Select one:
A. Not enforceable because the acceptance must be unconditional and unequivocal.
B. Not enforceable because the offeror has the right to choose with whom to contract.
C. Enforceable because of Brenda's intent to contract with Jolene.
D. Enforceable since Kevin did not deviate from the original terms of the offer. - ✔✔B.
Not enforceable because the offeror has the right to choose with whom to contract.
✔✔Tony got married at age 15, and then divorced only six months later. While still a
minor, Tony was providing child support to his ex-wife. If Tony ceases to provide child
support and his ex-wife sues him, it is likely that Tony
Select one:
A. Will not be required to pay child support until he reaches the age of majority.
B. Will only be required to provide child support based on his age and his income.
C. Will be required to continue to provide child support
D. Will not be obligated to pay because he is still a minor. - ✔✔C. Will be required to
continue to provide child support
✔✔Which one of the following is true regarding the capacity of a minor to contract?
Select one:
A. A minor cannot avoid a contract when he or she misrepresents his or her age.
B. A parent is always liable for a minor child's contract.
C. A minor can challenge a contract and retain the benefits of the contract.
D. A minor must fulfill his or her obligation under a contract for necessaries. - ✔✔D. A
minor must fulfill his or her obligation under a contract for necessaries.
,✔✔Persons claiming insanity may avoid a contract when
Select one:
A. They were experiencing a delusion.
B. The contract is for necessaries.
C. The contract was formed during an interval of time in which two or more independent
third parties are willing to attest to the person's inability to contract.
D. They did not know that a contract was forming or they did not understand the legal
consequences of acts purporting to form the contract. - ✔✔D. They did not know that a
contract was forming or they did not understand the legal consequences of acts
purporting to form the contract.
✔✔Merve filed for bankruptcy a few years ago. One of the debts included in her
bankruptcy was a car loan financed by Lending Bank for $8,000. Which one of the
following correctly describes whether Merve must do anything before Lending Back can
enforce a new promise by Merve to pay this debt and make payments once again on
this contract?
Select one:
A. Merve need provide no additional consideration.
B. Merve must make no additional promises to pay.
C. Merve must acknowledge the debt.
D. Merve must pay additional consideration. - ✔✔A. Merve need provide no additional
consideration.
✔✔Jessica, age 21, promised a 1995 Ford as a gift to her friend, Michelle, age 50.
Which one of the following is the missing element that would make this gift transaction a
contract?
Select one:
A. ConsiderationCorrect. Consideration makes a promise a contract. A promise to make
a gift or to do something without receiving consideration in return is not enforceable. It is
merely a gratuitous promise.
B. Assent
C. Capacity
D. Legal purpose - ✔✔A. Consideration Correct. Consideration makes a promise a
contract. A promise to make a gift or to do something without receiving consideration in
return is not enforceable. It is merely a gratuitous promise.
✔✔Public policy requires that the insured have an insurable interest in any property or
life to be covered by the policy. A person has an insurable interest in property if its
destruction would cause direct monetary loss. In order to be covered, this insurable
interest must exist
Select one:
A. Prior to the loss.
B. When the loss is reported.
C. At the time of loss.
D. When the property is acquired. - ✔✔C. At the time of loss
,✔✔Any contract allowing a lender more than the maximum legal interest is a usury
contract and is therefore illegal. Which one of the following is true in most states if a
lender is charging an illegally high rate of interest on a loan?
Select one:
A. The lender may collect the principal but is fined for usury action equal to the
exorbitant rate of interest previously charged.
B. The lender may collect the principal but is barred from collecting the interest.
C. The lender may not collect either the principal or the lost interest.
D. The lender may collect the principal and the lowest market interest rate. - ✔✔B. The
lender may collect the principal but is barred from collecting the interest.
✔✔Contracts may be illegal because they are against public policy or because they are
contrary to constitutional, statutory, or
Select one:
A. Interstate law.
B. Tort law.
C. Case law.
D. Criminal law. - ✔✔C. Case law.
✔✔Which one of the following is true regarding a void contract?
Select one:
A. A void contract is a contract in which the parties can execute it completely unless an
innocent party chooses to avoid it.
B. A void contract is not legally enforceable or binding.
C. A contract with a minor is always a void contract.
D. A void contract is entered into under fraud or duress. - ✔✔B. A void contract is not
legally enforceable or binding.
✔✔Which one of the following contract types requires each party to perform?
Select one:
A. Unilateral
B. Mutual
C. Implied
D. Bilateral - ✔✔D. Bilateral
✔✔The type of contract that is an obligation imposed by law because of the parties'
conduct or some special relationship between them or because one of them would
otherwise be unjustly enriched is a quasi-contract also known as
Select one:
A. An implied-in-fact contract.
B. An implied-in-law contract.
C. A voidable contract.
D. An executory contract. - ✔✔B. An implied-in-law contract.
, ✔✔The type of contract that has not been completely performed by one or both of the
parties is
Select one:
A. An implied-in-fact contract.
B. A voidable contract.
C. An implied-in-law contract.
D. An executory contract. - ✔✔D. An executory contract.
✔✔Is there any way that an offeree can accept a rejected offer to contract?
Select one:
A. No, the offeree can only invite the offeror to make the original offer again, at which
point the offeree can once again either accept or reject the offer.
B. Yes, provided that the original offer has not yet lapsed.
C. No, a rejected offer is terminated and any attempt to accept the rejected offer is
considered a new offer.
D. Yes, provided that the offeror did not rely on the offeree's rejection. - ✔✔C. No, a
rejected offer is terminated and any attempt to accept the rejected offer is considered a
new offer.
✔✔Which one of the following is the most important factor indicating whether a
communication is an offer?
Select one:
A. The offeror's subjective intent
B. The offeree's objective reaction to the offer
C. The offeree's subjective intent
D. The language that the offeror uses in the offer - ✔✔D. The language that the offeror
uses in the offer
✔✔If the subject matter of an offer is destroyed before acceptance, then the offer
terminates
Select one:
A. Due to a lapse of time, at the moment of destruction.
B. Due to a lack of intent to contract, at the moment the offeror learns of the destruction.
C. Due to the operation of law, at the moment of destruction.
D. Due to indefinite terms, at the moment the offeree learns of the destruction. - ✔✔C.
Due to the operation of law, at the moment of destruction.
✔✔Absent a specific expiration time, which one of the following represents when an
offer ceases to be binding?
Select one:
A. When one year has elapsed after the original offer
B. When a reasonable amount of time passes, based on considerations such as the
contract's subject matter and the general commercial setting
C. When a reasonable amount of time passes, based on how long it would take an
average offeree to accept or reject the offer
