Chapter 2 Contract Law

33 Questions | Total Attempts: 74

SettingsSettingsSettings
Please wait...
Contract Law Quizzes & Trivia

Questions and Answers
  • 1. 
    In insurance, an offer is usually made when
    • A. 

      The agent hands the policy to the policyholder.

    • B. 

      An agent explains a policy to a potential applicant.

    • C. 

      The application is submitted.

    • D. 

      The insurer approves the application and receives the initial premium.

  • 2. 
    An insured stated on her application for life insurance that she had never had a heart attack, when in fact she had a series of minor heart attacks last year for which she sought medical attention. Which of the following will explain the reason a death benefit claim is denied?
    • A. 

      Estoppel

    • B. 

      Material misrepresentation

    • C. 

      Waiver

    • D. 

      Utmost Good Faith

  • 3. 
    If only one party to an insurance contract has made a legally enforceable promise, what kind of contract is it?
    • A. 

      Conditional

    • B. 

      A legal, but unethical contract

    • C. 

      Unilateral

    • D. 

      Adhesive

  • 4. 
    Contracts that are prepared by one party and submitted to the other party on a "take it or leave it" basis are classified as
    • A. 

      Contracts of adhesion

    • B. 

      Unilateral contracts

    • C. 

      Aletory contracts

    • D. 

      Binding Contracts

  • 5. 
    The importance of a misrepresentation is determined by
    • A. 

      Whether or not the policy is already issued.

    • B. 

      The materiality of a given concealment.

    • C. 

      The amount of money potentially lost.

    • D. 

      The cost of investigation.

  • 6. 
    An intentional or unintentional concealment entitles the affected party to which of the following?
    • A. 

      Waiver of concealed conditions

    • B. 

      Subrogation of a contract.

    • C. 

      Rescission of a contract.

    • D. 

      Estoppel.

  • 7. 
    Which of the following is NOT correct regarding false statements by a person engaged in the business of insurance?
    • A. 

      Oral statements cannot be considered fraud.

    • B. 

      Omissions of material fact on insurance application are fraud.

    • C. 

      False statements about financial condition of an insurer are unlawful.

    • D. 

      Statements made with the intent to deceive are unlawful.

  • 8. 
    Which of the following is NOT a required element of an insurance contract?
    • A. 

      Acceptance

    • B. 

      Competent parties

    • C. 

      Consideration

    • D. 

      Counteroffer

  • 9. 
    When an insured makes truthful statements on the application for insurance and pays the required premium, it is known as which of the following?
    • A. 

      Consideration

    • B. 

      Legal purpose

    • C. 

      Contract of adhesion

    • D. 

      Acceptance

  • 10. 
    An insured wants to transfer his personal insurance policy to a friend. Under what conditions would this be possible?
    • A. 

      The insured can transfer the policy to his friend and then notify the insurer of the change.

    • B. 

      The insured will need a written consent of the insurer.

    • C. 

      It is impossible to transfer a policy.

    • D. 

      The insured would have to surrender his policy to the insurer, and his friend could then ask to buy it.

  • 11. 
    Insurance contracts have unique characteristics not usually found in other types of contracts. They require each party to rely upon the representations of the other and reasonably expect the other is acting without attempts to conceal or deceive. This is known as
    • A. 

      Utmost good faith.

    • B. 

      Estoppel.

    • C. 

      Parol evidence rule.

    • D. 

      Warranties.

  • 12. 
    Which of the following best describes a misrepresentation?
    • A. 

      A statement that is not guaranteed to be true.

    • B. 

      A statement intended to distract, mislead, or deceive a party to a contract.

    • C. 

      A failure to disclose known facts.

    • D. 

      An intentional omission of material information on the part of the insured.

  • 13. 
    The key factor of representation that allows the injured party to rescind the contract is
    • A. 

      If the representation is false in a material point.

    • B. 

      If the representation is false in an immaterial point.

    • C. 

      Representations are statement’s believed to be true and hold no legal consequences.

    • D. 

      The promise or assurance of the representation.

  • 14. 
    In insurance policies, the insured is not legally bound to any particular action in the insurance contract, but the insurer is legally obligated to pay losses covered by the policy. What contract element does this describe?
    • A. 

      Conditional

    • B. 

      Unilateral

    • C. 

      Unidirectional

    • D. 

      Aleatory

  • 15. 
    The failure to disclose all known facts is called
    • A. 

      Waiver

    • B. 

      Concealment

    • C. 

      Twisting

    • D. 

      Misrepresentation

  • 16. 
    When may a representation be withdrawn?
    • A. 

      After the policy is issued

    • B. 

      Within the first 2 years of the policy

    • C. 

      Prior to the issuance of the policy

    • D. 

      At any time

  • 17. 
    Which of the following is an absolute statement to the insurer by the insured upon which the validity of the insurance policy depends?
    • A. 

      Testimony

    • B. 

      Representation

    • C. 

      Warranty

    • D. 

      Application

  • 18. 
    Which of the following best describes the concept that the insured pays a small amount of premium for a large amount of risk on the part of the insurance company?
    • A. 

      Subrogation

    • B. 

      Warranty

    • C. 

      Aleatory

    • D. 

      Adhesion

  • 19. 
    Fraudulent activities in health care are estimated in billions of dollars annually. This results in
    • A. 

      Stricter underwriting requirements.

    • B. 

      Increase in health care costs for everyone.

    • C. 

      More people going to jail.

    • D. 

      Fewer insurance policies being written.

  • 20. 
    Which of the following would be covered by contract law?
    • A. 

      An employer suing an employee for spreading damaging rumors.

    • B. 

      An insured suing the insurer for failure to provide promised benefits.

    • C. 

      A consumer suing the manufacturer for a defective product.

    • D. 

      Neighbors suing each other for trespassing.

  • 21. 
    Statements made by an applicant for a life insurance policy that are true to the best of the applicant's knowledge are referred to as
    • A. 

      Warranties

    • B. 

      Information

    • C. 

      Representations

    • D. 

      Facts

  • 22. 
    Under what conditions would a contract between an insurer and prospective insured be legal?
    • A. 

      The applicant is drunk at the time of application.

    • B. 

      The applicant is a 12-year-old student.

    • C. 

      The applicant is high on methamphetamines at the time of application.

    • D. 

      The applicant has been convicted of a felony.

  • 23. 
    When an insured makes truthful statements on the application for insurance and pays the required premium, it is known as which of the following?
    • A. 

      Contract of adhesion

    • B. 

      Acceptance

    • C. 

      Consideration

    • D. 

      Legal purpose

  • 24. 
    Insurance policy is
    • A. 

      Any method used to transfer or avoid catastrophic risk.

    • B. 

      A written instrument in which a contract of insurance is set forth.

    • C. 

      A statement of insurable interest.

    • D. 

      A verbal or written agreement between two parties to transfer risk.

  • 25. 
    An insured wants to transfer his personal insurance policy to a friend. Under what conditions would this be possible?
    • A. 

      It is impossible to transfer a policy.

    • B. 

      The insured would have to surrender his policy to the insurer, and his friend could then ask to buy it.

    • C. 

      The insured can transfer the policy to his friend and then notify the insurer of the change.

    • D. 

      The insured will need a written consent of the insurer.

  • 26. 
    L’s insurer has made all of the decisions regarding the provisions included in her policy. L finds an objectionable provision and wants to negotiate it with the insurer but is not allowed to do so. Her only options are to reject the policy or accept it as is. Which contract feature does this describe?
    • A. 

      Dictatorial

    • B. 

      Adhesion

    • C. 

      Unilateral

    • D. 

      Conditional

  • 27. 
    • A. 

      $1,000 for any compensatory damages

    • B. 

      Rescission of the policy

    • C. 

      Nothing. Only intentional concealment is punishable.

    • D. 

      No less than $500 and no more than $5,000 for compensatory damages

  • 28. 
    Concealment as defined by the California Insurance Code is
    • A. 

      Statement based on the best knowledge and belief of the person giving the information.

    • B. 

      Neglect on the part of insured to communicate the information waived by the other party.

    • C. 

      Neglect on the part of insured to communicate all information known to be material to the insurer.

    • D. 

      Failure to communicate information that should be known.

  • 29. 
    An insured pays a small $100 premium every month, yet the insurer promises to pay a high percentage of all medical costs. What element of an insurance contract does this describe?
    • A. 

      Aleatory

    • B. 

      Good health

    • C. 

      Adhesion

    • D. 

      Conditional

  • 30. 
    Intentionally misrepresenting or concealing a material fact to induce an insurance company to make a contract is known as
    • A. 

      Misrepresentation.

    • B. 

      Concealment.

    • C. 

      Fraud.

    • D. 

      Avoidance.

  • 31. 
    What other term is used to refer to unintentional torts?
    • A. 

      Peril

    • B. 

      Breach of contract

    • C. 

      Negligence

    • D. 

      Hazard

  • 32. 
    The proposed insured makes the premium payment on a new insurance policy. if the insured should dies, the insurer will pay the death benefit to the beneficiary if the policy is approved. this is an example of what kind of contract?
    • A. 

      Adhesion

    • B. 

      Personal

    • C. 

      Unilateral

    • D. 

      Conditional

  • 33. 
    The written instrument, in which a contract of insurance is set forth, is known as the
    • A. 

      Insuring cause

    • B. 

      Right of agency

    • C. 

      Policy

    • D. 

      Binding clause