Contract Law Unit 2 Vocabulary
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Questions and Answers

What is required for a contract to be considered valid?

  • Competent parties under the law (correct)
  • A notary's signature
  • Witnesses present during the signing
  • A verbal agreement between any parties
  • What is meant by 'consideration' in a contract?

  • The written terms of the agreement
  • The signature of all parties involved
  • A thing of value exchanged for the performance promised (correct)
  • The legal enforceability of the contract
  • Which of the following describes an 'aleatory' contract?

  • The value exchanged is equal between both parties
  • It is based on a definite exchange of values
  • It requires multiple signatories to be valid
  • It depends on an uncertain event providing unequal value transfer (correct)
  • What does the Principle of Indemnity state?

    <p>Individuals should be restored to prior financial conditions after a loss</p> Signup and view all the answers

    Which clause of an insurance policy outlines what is covered?

    <p>The Insuring Agreements</p> Signup and view all the answers

    What is the role of the Doctrine of Reasonable Expectations?

    <p>To assert that policies should include coverages expected by the average person</p> Signup and view all the answers

    What does a unilateral contract imply?

    <p>Only one party makes a promise</p> Signup and view all the answers

    What is an adhesion contract characterized by?

    <p>Greater power of one party in drafting the contract</p> Signup and view all the answers

    Study Notes

    Contract Fundamentals

    • A contract is a legal agreement between two competent parties promising performance in exchange for consideration.
    • Competent parties must fulfill legal criteria for a contract to be valid; both must have the capacity to enter into the agreement.
    • A contract lacking legal purpose, such as those against public policy, is unenforceable.

    Key Elements of a Contract

    • Consideration refers to the value exchanged for the promised performance in the contract.
    • Contracts require an offer from one party and acceptance by another, establishing mutual agreement.

    Principles and Types of Contracts

    • The Principle of Indemnity stipulates that an individual should be returned to their previous financial condition after a loss, but not gain beyond that.
    • A personal contract signifies that the insurance covers the individual rather than the property.
    • Aleatory contracts feature unequal value transfer, contingent on uncertain events like losses.
    • Adhesion contracts are characterized by one party exerting more power during drafting, often leading to unfavorable terms for the other party.

    Importance of Expectations and Trust

    • The Doctrine of Reasonable Expectations ensures that policies include coverages an average person would reasonably expect, regardless of literal policy language.
    • Unilateral contracts involve a one-sided promise, where only one party is bound to act.
    • The Contract of Utmost Good Faith relies on the integrity of both the insurer and the insured, where truthfulness is essential for policy issuance and claims processing.

    Components of an Insurance Contract

    • Declarations include essential details such as the insured's name, address, coverage amount, property description, and property cost.
    • Insuring Agreements outline the general coverage and specifics regarding insured property types.
    • Conditions detail the responsibilities and obligations of both the insurance company and the insured.
    • Exclusions specify losses or situations for which coverage is not provided to the insured.
    • Definitions clarify the meanings of specific terms utilized within the insurance policy.

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    Description

    Test your knowledge on key vocabulary from Unit 2 of Contract Law. This quiz covers essential terms such as 'Contract', 'Competent Parties', 'Legal Purpose', and 'Consideration'. Mastering these definitions is crucial for understanding the fundamentals of contractual agreements.

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