CPCU 530 Questions and
Complete Solutions Graded A+
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 - Answer:
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 - Answer: 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. - Answer: 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. - Answer: 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 - Answer: 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. - Answer: 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. - Answer: 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. - Answer: 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. - Answer: 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 - Answer: 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. -
Answer: 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. - Answer:
B. There has been valid acceptance, because complaining has no effect.
Complete Solutions Graded A+
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 - Answer:
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 - Answer: 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. - Answer: 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. - Answer: 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 - Answer: 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. - Answer: 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. - Answer: 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. - Answer: 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. - Answer: 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 - Answer: 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. -
Answer: 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. - Answer:
B. There has been valid acceptance, because complaining has no effect.
