AIC 301 - final exam prep questions 2025
UPDATE |COMPLETE EXAM TEST AND
VERIFIED ANSWERS MULTIPLE CHOICES
WITH RATIONALES| ACCURATE ANSWERS|
100% SOLVED!!
Hugo opened a small cookie shop on Main Street. He entered into a requirements contract with Lily, a sugar supplier.
Hugo lied to Lily during the negotiations of the contract and told her that he owned a coffee shop. Hugo erroneously
thought that he might get a better price from Lily if she thought he sold coffee instead of cookies, but, in fact, Lily's
price had nothing to do with Hugo's business. Lily eventually found out that Hugo lied, and she wanted to use her
discovery to terminate the contract. Is this contract enforceable?
Select one:
A. No, the contract is not enforceable, because Hugo committed fraud when he lied about the nature of his shop.
B. Yes, the contract is enforceable, and Lily does not have any legal justification for terminating the contract.
C. Yes, the contract is enforceable, but Lily can choose to avoid the contract because of Hugo's misrepresentation.
D. No, the contract is not enforceable,
B. Yes, the contract is enforceable, and Lily does not have any legal justification for terminating the contract.
Sam builds single- and two-seat airplanes in his garage. He takes every care to be sure he stores fuels safely, has
fire suppression equipment in place, and minimizes any noise associated with testing the engines. One day, an
engine explodes during testing, releasing oil and airplane fuel that flow onto his neighbor's property. Which one of the
following characteristics of ultrahazardous activities existed?
Select one:
A. It involves activities that should normally be undertaken in an industrial environment.
B. It involved a dangerous substance that was brought onto real property and escaped, causing damage.
C. It involved aviation which, by definition, is automatically a strict liability situation.
D. The manufacturer of the airplane fuel created a product that was inherently dangerous
.
B. It involved a dangerous substance that was brought onto real property and escaped, causing damage.
Which one of the following correctly notes a difference between nonwaiver agreements and reservation of rights
letters?
Select one:
A. Only reservation of rights letters allow the insurer to retain the right to deny coverage later.
B. The reservation of rights letter provides unilateral notice to the insured.
C. Reservation of rights letters are generally not enforced by the courts.
D. Only nonwaiver agreements prevent insured's subsequent claims for waiver.
B. The reservation of rights letter provides unilateral notice to the insured.
, 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
Select one:
A. A property alteration.
B. An improvement or betterment.
C. A trade fixture.
D. A leasehold interest.
C. A trade fixture.
All of the following debts are not dischargeable in bankruptcy, EXCEPT:
Select one:
A. Services obtained by fraud
B. Most student loans
C. Payments owed on leases
D. Alimony
C. Payments owed on leases
InsurCo executives are concerned about some new legislation so they write to their state's department of insurance
for guidance. The department writes back with advice about the new law. When an administrative agency clarifies
statutes for regulated parties, it is writing which one of the following?
Select one:
A. Interpretive rule, and it is binding on the regulated parties.
B. Legislative rule, and it is non-binding.
C. Legislative rule, and it is binding on the regulated parties.
D. Interpretive rule, and it is non-binding.
D. Interpretive rule, and it is non-binding.
John contracts with Rex to purchase three steel braces by April 5. In the contract, they agree that the amount of
damages either of them would pay in the event of breach would be $50,000. The $50,000 is the result of their good
faith effort to estimate actual damages that probably would result from a breach. These types of damages are known
as
Select one:
A. Special damages.
B. Punitive damages.
C. Liquidated damages.
D. Equitable remedies.
C. Liquidated damages.
The Martin brothers, Larry and Kent, each own a home and share ownership of tools, equipment, and home
furnishings. They also have three vehicles, two of which are owned by Kent, and the third is owned jointly. Their
property is covered under policies issued by Insurance Company, and all policies refer to the description of property
UPDATE |COMPLETE EXAM TEST AND
VERIFIED ANSWERS MULTIPLE CHOICES
WITH RATIONALES| ACCURATE ANSWERS|
100% SOLVED!!
Hugo opened a small cookie shop on Main Street. He entered into a requirements contract with Lily, a sugar supplier.
Hugo lied to Lily during the negotiations of the contract and told her that he owned a coffee shop. Hugo erroneously
thought that he might get a better price from Lily if she thought he sold coffee instead of cookies, but, in fact, Lily's
price had nothing to do with Hugo's business. Lily eventually found out that Hugo lied, and she wanted to use her
discovery to terminate the contract. Is this contract enforceable?
Select one:
A. No, the contract is not enforceable, because Hugo committed fraud when he lied about the nature of his shop.
B. Yes, the contract is enforceable, and Lily does not have any legal justification for terminating the contract.
C. Yes, the contract is enforceable, but Lily can choose to avoid the contract because of Hugo's misrepresentation.
D. No, the contract is not enforceable,
B. Yes, the contract is enforceable, and Lily does not have any legal justification for terminating the contract.
Sam builds single- and two-seat airplanes in his garage. He takes every care to be sure he stores fuels safely, has
fire suppression equipment in place, and minimizes any noise associated with testing the engines. One day, an
engine explodes during testing, releasing oil and airplane fuel that flow onto his neighbor's property. Which one of the
following characteristics of ultrahazardous activities existed?
Select one:
A. It involves activities that should normally be undertaken in an industrial environment.
B. It involved a dangerous substance that was brought onto real property and escaped, causing damage.
C. It involved aviation which, by definition, is automatically a strict liability situation.
D. The manufacturer of the airplane fuel created a product that was inherently dangerous
.
B. It involved a dangerous substance that was brought onto real property and escaped, causing damage.
Which one of the following correctly notes a difference between nonwaiver agreements and reservation of rights
letters?
Select one:
A. Only reservation of rights letters allow the insurer to retain the right to deny coverage later.
B. The reservation of rights letter provides unilateral notice to the insured.
C. Reservation of rights letters are generally not enforced by the courts.
D. Only nonwaiver agreements prevent insured's subsequent claims for waiver.
B. The reservation of rights letter provides unilateral notice to the insured.
, 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
Select one:
A. A property alteration.
B. An improvement or betterment.
C. A trade fixture.
D. A leasehold interest.
C. A trade fixture.
All of the following debts are not dischargeable in bankruptcy, EXCEPT:
Select one:
A. Services obtained by fraud
B. Most student loans
C. Payments owed on leases
D. Alimony
C. Payments owed on leases
InsurCo executives are concerned about some new legislation so they write to their state's department of insurance
for guidance. The department writes back with advice about the new law. When an administrative agency clarifies
statutes for regulated parties, it is writing which one of the following?
Select one:
A. Interpretive rule, and it is binding on the regulated parties.
B. Legislative rule, and it is non-binding.
C. Legislative rule, and it is binding on the regulated parties.
D. Interpretive rule, and it is non-binding.
D. Interpretive rule, and it is non-binding.
John contracts with Rex to purchase three steel braces by April 5. In the contract, they agree that the amount of
damages either of them would pay in the event of breach would be $50,000. The $50,000 is the result of their good
faith effort to estimate actual damages that probably would result from a breach. These types of damages are known
as
Select one:
A. Special damages.
B. Punitive damages.
C. Liquidated damages.
D. Equitable remedies.
C. Liquidated damages.
The Martin brothers, Larry and Kent, each own a home and share ownership of tools, equipment, and home
furnishings. They also have three vehicles, two of which are owned by Kent, and the third is owned jointly. Their
property is covered under policies issued by Insurance Company, and all policies refer to the description of property
