CPCU 530 QUESTIONS AND ANSWERS
Cian purchased a house with money loaned to him by Keithly Mortgage Co. (KMC).
Cian obtained a homeowner policy from Melfor Insurance—containing a standard
mortgage clause—which covered the house for damage due to windstorm. A windstorm
destroyed Cian's house three years later. Which one of the following correctly states
who is entitled to the proceeds payable under Cian's homeowner policy?
Select one:
A. Cian, because the policy was solely for his benefitIncorrect. Under the standard
mortgage clause, insurance policy proceeds are payable to the mortgagee "as the
mortgagee's interests may appear." Thus, KMC would receive the proceeds up to the
amount of its loan and Cian would receive any remaining amount.
B. KMC, as its interests appear.
C. KMC, under the doctrine of equitable conversion
D. KMC, because the policy was solely for its benefit - Answers :
An insured is accusing Millstone Insurance of unethical claims handling practices. The
Department of insurance (DOI) has issued a subpoena requiring Millstone Insurance to
produce its records for this claim and documents on its claim handling procedures.
Which one of the following types of subpoena is being used by the DOI?
Select one:
A. Subpoena ad testificandum
B. Final order subpoena
C. Self-incrimination subpoena
D. Subpoena duces tecum - Answers :D. Subpoena duces tecum
Some contracts are voidable, and some agreements are void because they are not
contracts. When a contract is voidable, the right of avoidance is available only to
Select one:
A. Parties in privity of the contract.
B. The offeror of the contract.
C. The offeree of the contract.I
D. An innocent or injured party. - Answers :D. An innocent or injured party.
Physician Betty administered medical services to stroke victim Karl who was
unconscious. She provided medication and direction and followed all procedures. When
Karl woke up, he refused other medical services and he also indicated that he could not
be held liable for any expenses that he did not personally authorize or to which he did
not consent. It is likely that Karl might be required to pay the reasonable value of the
services received based on
Select one:
A. An implied-in-fact contract.
B. An implied-in-law contract.
C. A unilateral contract.
D. An executory contract. - Answers :B. An implied-in-law contract.
,A contract is made between two parties for delivery of goods. The goods are delivered
and the receiving party pays for them. Which one of the following terms describes the
contract?
Select one:
A. ExecutedCorrect.
B. Exacted
C. Executory
D. Completed - Answers :A. Executed
A homeowners policy is an example of
Select one:
A. An executory contract
B. A personal contract.
C. An implied-in-fact contract.
D. An implied-in-law contract. - Answers :A. An executory contract
for the extra two bushels and Hank refused to give her the apples unless she paid for all
six bushels. Which one of the following statements is true?
Select one:
A. Hank breached the contract.
B. There was no valid offer made and therefore no contract between Hilda and Hank.
C. Hank and Hilda did not mutually assent to the terms of the contract when it was
formed.
D. There was no communication of intent to contract from Hank to Hilda. - Answers :A.
Hank breached the contract.
Which one of the following most accurately describes the ability of an offeror to revoke
an offer made to an individual offeree?
Select one:
A. An offeror can revoke an offer any time before acceptance, but the revocation is
effective only when communicated to the offeree and the offeree actually receives the
communication.
B. An offeror can revoke an offer any time before acceptance, but must do so through
the same means of communication used in making the original offer.
C. An offeror can revoke an offer either by expressly refusing to abide by it or by making
a new offer to the offeree.
D. An offeror can revoke an offer by any reasonable means, at any time before the
offeree completes performance of the contract. - Answers :A. An offeror can revoke an
offer any time before acceptance, but the revocation is effective only when
communicated to the offeree and the offeree actually receives the communication.
Charlotte wanted a swimming pool built in her backyard, so she asked various pool
installers she knew to give her an estimate. Only Emma replied, and the price she
quoted to Charlotte was much more than Charlotte wanted to pay. A party that asks for
offers
Select one:
,A. Is free to accept or reject any offers that the party receives.
B. Is actually making an offer, and any reply to the request is an acceptance of the
original offer.
C. Must accept any reasonable offers that the party receives.
D. Must accept any offers that the party receives. - Answers :A. Is free to accept or
reject any offers that the party receives.
Juan's Accounting wants to upgrade its software program. It has been working with
Jane's Software Company to select the upgrades that will meet its business needs and
Juan's Accounting is ready to make an offer. Which one of the following sets of
elements must be included to constitute a legal offer?
Select one:
A. Legal purpose, period of time the offer is valid, and acceptance terms
B. Period of time the offer is valid, acceptance options, and intent to contract
C. Intent to contract, definite terms, and communication to the offeree
D. Legal purpose, definite terms, and options for the offeree - Answers :C. Intent to
contract, definite terms, and communication to the offeree
Franklin says to Dorian: "I will sell you 15 dog collars in any color at $10.00 each if you
give me the money by Saturday." Which one of the following statements constitutes an
unconditional and unequivocal acceptance by Dorian?
Select one:
A. I will buy the collars on Sunday when I come over to your house.
B. I hope to have the money this weekend to buy the dog collars you are selling if I am
able to get to the bank.
C. I accept. I will buy 15 dog collars at $8.00 each on Saturday.
D. I accept. I will buy the collars on or before Saturday with the color of the collars to be
worked out. - Answers :D. I accept. I will buy the collars on or before Saturday with the
color of the collars to be worked out.
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. - Answers :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. -
Answers :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. - Answers :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. - Answers
: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. - Answers :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.
Cian purchased a house with money loaned to him by Keithly Mortgage Co. (KMC).
Cian obtained a homeowner policy from Melfor Insurance—containing a standard
mortgage clause—which covered the house for damage due to windstorm. A windstorm
destroyed Cian's house three years later. Which one of the following correctly states
who is entitled to the proceeds payable under Cian's homeowner policy?
Select one:
A. Cian, because the policy was solely for his benefitIncorrect. Under the standard
mortgage clause, insurance policy proceeds are payable to the mortgagee "as the
mortgagee's interests may appear." Thus, KMC would receive the proceeds up to the
amount of its loan and Cian would receive any remaining amount.
B. KMC, as its interests appear.
C. KMC, under the doctrine of equitable conversion
D. KMC, because the policy was solely for its benefit - Answers :
An insured is accusing Millstone Insurance of unethical claims handling practices. The
Department of insurance (DOI) has issued a subpoena requiring Millstone Insurance to
produce its records for this claim and documents on its claim handling procedures.
Which one of the following types of subpoena is being used by the DOI?
Select one:
A. Subpoena ad testificandum
B. Final order subpoena
C. Self-incrimination subpoena
D. Subpoena duces tecum - Answers :D. Subpoena duces tecum
Some contracts are voidable, and some agreements are void because they are not
contracts. When a contract is voidable, the right of avoidance is available only to
Select one:
A. Parties in privity of the contract.
B. The offeror of the contract.
C. The offeree of the contract.I
D. An innocent or injured party. - Answers :D. An innocent or injured party.
Physician Betty administered medical services to stroke victim Karl who was
unconscious. She provided medication and direction and followed all procedures. When
Karl woke up, he refused other medical services and he also indicated that he could not
be held liable for any expenses that he did not personally authorize or to which he did
not consent. It is likely that Karl might be required to pay the reasonable value of the
services received based on
Select one:
A. An implied-in-fact contract.
B. An implied-in-law contract.
C. A unilateral contract.
D. An executory contract. - Answers :B. An implied-in-law contract.
,A contract is made between two parties for delivery of goods. The goods are delivered
and the receiving party pays for them. Which one of the following terms describes the
contract?
Select one:
A. ExecutedCorrect.
B. Exacted
C. Executory
D. Completed - Answers :A. Executed
A homeowners policy is an example of
Select one:
A. An executory contract
B. A personal contract.
C. An implied-in-fact contract.
D. An implied-in-law contract. - Answers :A. An executory contract
for the extra two bushels and Hank refused to give her the apples unless she paid for all
six bushels. Which one of the following statements is true?
Select one:
A. Hank breached the contract.
B. There was no valid offer made and therefore no contract between Hilda and Hank.
C. Hank and Hilda did not mutually assent to the terms of the contract when it was
formed.
D. There was no communication of intent to contract from Hank to Hilda. - Answers :A.
Hank breached the contract.
Which one of the following most accurately describes the ability of an offeror to revoke
an offer made to an individual offeree?
Select one:
A. An offeror can revoke an offer any time before acceptance, but the revocation is
effective only when communicated to the offeree and the offeree actually receives the
communication.
B. An offeror can revoke an offer any time before acceptance, but must do so through
the same means of communication used in making the original offer.
C. An offeror can revoke an offer either by expressly refusing to abide by it or by making
a new offer to the offeree.
D. An offeror can revoke an offer by any reasonable means, at any time before the
offeree completes performance of the contract. - Answers :A. An offeror can revoke an
offer any time before acceptance, but the revocation is effective only when
communicated to the offeree and the offeree actually receives the communication.
Charlotte wanted a swimming pool built in her backyard, so she asked various pool
installers she knew to give her an estimate. Only Emma replied, and the price she
quoted to Charlotte was much more than Charlotte wanted to pay. A party that asks for
offers
Select one:
,A. Is free to accept or reject any offers that the party receives.
B. Is actually making an offer, and any reply to the request is an acceptance of the
original offer.
C. Must accept any reasonable offers that the party receives.
D. Must accept any offers that the party receives. - Answers :A. Is free to accept or
reject any offers that the party receives.
Juan's Accounting wants to upgrade its software program. It has been working with
Jane's Software Company to select the upgrades that will meet its business needs and
Juan's Accounting is ready to make an offer. Which one of the following sets of
elements must be included to constitute a legal offer?
Select one:
A. Legal purpose, period of time the offer is valid, and acceptance terms
B. Period of time the offer is valid, acceptance options, and intent to contract
C. Intent to contract, definite terms, and communication to the offeree
D. Legal purpose, definite terms, and options for the offeree - Answers :C. Intent to
contract, definite terms, and communication to the offeree
Franklin says to Dorian: "I will sell you 15 dog collars in any color at $10.00 each if you
give me the money by Saturday." Which one of the following statements constitutes an
unconditional and unequivocal acceptance by Dorian?
Select one:
A. I will buy the collars on Sunday when I come over to your house.
B. I hope to have the money this weekend to buy the dog collars you are selling if I am
able to get to the bank.
C. I accept. I will buy 15 dog collars at $8.00 each on Saturday.
D. I accept. I will buy the collars on or before Saturday with the color of the collars to be
worked out. - Answers :D. I accept. I will buy the collars on or before Saturday with the
color of the collars to be worked out.
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. - Answers :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. -
Answers :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. - Answers :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. - Answers
: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. - Answers :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.
