Contract Law Vocabulary Unit 2

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.

This quiz focuses on essential vocabulary terms related to contract law. It covers definitions such as 'competent parties,' 'legal purpose,' and 'consideration,' which are crucial for understanding the fundamentals of contractual agreements. Test your knowledge on these key terms to enhance your legal vocabulary.