Cpcu 530 homework_chapters 2&3_feb 2013

Consideration—Activities 1

1 Donna M. Kesot© 2011 AICPCU©2011 For registered students in CPCU 530 Business Law

CPCU 530 Homework 2Business Law for the Insurance Professional

Donna M. Kesot, CPCU for American Institutes for Chartered Property & Casualty Underwriters

February 2013Homework


Chapter 2

Educational Objective (EO) -- Types of ContractsContrast the following types of contracts considering these elements, Contract, promisor, promisee, privity of contract, third party beneficiary, breach of contract:

Bilateral and unilateral Executed and executory Express and implied Void and voidable

Quiz Yourself (cover Answer column and see how you do, add an example)Types of Contracts Answers Examples will vary1. Bilateral contract

2. Unilateral contract

3. Executory contract

4. Executed contract

5. Implied contract

6. Express contract7. Implied-in-fact contract

8. Implied-in-law contract

9. Voidable contract

10. Void contract



Educational Objective (EO) -- Requirements of an OfferDescribe the requirements of a valid offer.

1. Why is an offer necessary for an enforceable contract?2. What are the three requirements for a valid offer?3. What types of communications are not offers?4. Give some examples of definite terms in an offer.5. What factors help determine whether an offer is binding?

Educational Objective (EO) -- Requirements of a Valid AcceptanceDescribe the requirements of a valid acceptance.

• Acceptance made by the offeree.• Unconditional and unequivocal.• Communicate the acceptance to the offeror

Educational Objective (EO) -- Capacity to ContractDescribe the circumstances in which each of the following has the capacity to contract:

Minor Insane person Intoxicated person Artificial entity

Use key terms in your description



Educational Objective (EO) -- ConsiderationDescribe consideration for a contract in terms of the following:

• Types of consideration

• Situations in which a contract is enforceable despite a lack of consideration



Describing Consideration Types and Contract Enforceability Write a description of each type of consideration (or exception to consideration requirement) below, and indicate whether it is sufficient for an enforceable contract.

Consideration (or exception)

Description Contract Enforceable

? (Y/N)Valuable consideration

Good consideration

Gratuitous promise

Past consideration

Promises to perform existing obligations

Binding promises

Charitable Subscriptions

Present and future consideration

Compromise and release of claims



Promissory Estoppel

Forbearance


Contract Interpretation—Activities 7

Educational Objective (EO) -- Legal Purpose of a Contract

Given a contract, determine whether it has a legal purpose.

An you describe a contract which is illegal?

What makes it illegal?



Educational Objective (EO) -- Enforceability of a Contract

Explain how each of the following may render a contract unenforceable:

• Fraud• Mistake• Duress• Undue influence• Innocent misrepresentation• Statute of frauds• Parol evidence rule

Quiz Yourself (cover Answer column and see how you do)Enforceability of a contract “What is/are…”

An intentional misrepresentation that results in harm to a person or organization.

In a contract, the demonstration that parties intent to form a legally binding agreement.

Legal action sought by a plaintiff that voids the bid of a principal.

A perception by both parties to a contract that does not agree with the facts.

A perception by one party to a contract that does not agree with the facts.

Use of violence or threats of violence to compel a party to act against their wishes when entering a contract.

Improper use of power or trust to deprive someone of free will in entering a contract.

Reasonably relying on this type of



material fact with no intent to defraud, results in avoidance of a contract due to lack of genuine assent.

A contract in which only one party promises to perform.

This law prevents fraud and perjury by requiring certain contracts in writing with the responsible party’s signature.

A contract in which each party promises to perform.

Contracts related to sale of or legal interest in this type of tangible property must be in writing.

This regulation provides a consistent legal basis for business transactions in the U.S.

This limits the terms of a contract to only those expressed in writing.

Something that needs to occur before a duty to perform arises in a contract.

These types of insurance contracts are not subject to a statute of frauds, and are valid and enforceable.

This type of mistake does not affect the binding nature of a contract.

Perception that does not align with the facts.



Educational Objective (EO) -- Contract Interpretation

Paraphrase the rules on contract construction that courts commonly use to interpret contracts.

Examples include: plain meaning, trade usage, ambiguity, clerical errors

Can you explain the list in your own words?

Educational Objective (EO) -- Third Party Contractual Rights

Describe the circumstances in which a third party would have enforceable rights under a contract.

Describing Third Party Contractual Rights

Third parties generally do not have rights under a contract, but the exceptions are when a contract is assigned, or for a third party beneficiary contract.

Which types of rights can be assigned to a third person? What are some examples of contract rights that can’t be assigned? What type of assignment needs to be in writing, and why? Who can benefit from third-party beneficiary contracts? Do any of these parties

have enforceable rights? What rights are given to a beneficiary under a contract?

Educational Objective (EO) -- Termination of a Contract

Describe the various ways in which the contractual obligations of the parties to a contract can be terminated.



Educational Objective (EO) -- Breach of Contract

Describe breach of contract in terms of the following:

• Types of breach

• Remedies for breach

Quiz Yourself (cover Answer column and see how you do)

Breach of Contract Answers may include...1. Describe the types of

breaches.

2. Describe the damages in breach of contract lawsuits.


Contracts Case Study—Activities 12

Educational Objective (EO) -- Contracts Case Study

Given a case, determine whether a described contract would be legally enforceable.

Determining the Enforceability of a Contract

In order to determine whether a contract is legally enforceable, you must establish two things:

• That a valid contract was formed, and

• That the contract is enforceable.

If a legally enforceable contract is breached, then the injured party can seek remedies and other options.

If necessary, review the Le Garde´Manger case facts in the course materials.

Determining the

Enforceability of a Contract

Answers

1. Assume that Jake and Marta have just finished signing the proposal that Paul submitted and have given him a check for $5,000 as a deposit payment. It is at this point that they discover that Paul is an unlicensed contractor. Is the contract enforceable? Why or why not?

2. Jake and Marta received a fourth proposal from a contractor who is a friend of theirs. He offered to construct the deck in exchange for “$500 and a few meals.” Jake and Marta like his proposal best, sign it, and give him the $500 deposit. Is this an enforceable contract? Why or why not?


Representations and Warranties in Insurance—Activities 13

Chapter 3

Educational Objective (EO) -- Special Characteristics of

Insurance Contracts

Describe these characteristics of insurance contracts:

• A conditional contract

• A contract involving fortuitous events and the exchange of unequal amounts

• A contract of utmost good faith

• A contract of adhesion

• A contract of indemnity

• A nontransferable contract

Can you name one or two special characteristics of each?



Educational Objective (EO) -- Insurance Contract Formation

Describe the unique characteristics of insurance contract formation with regard to these aspects:

• Agreement

• Content

• Delivery

Quiz Yourself (cover Answer column and see how you do)

Questions Contract Formation Answers1. Describe the point in the

selling process when there is an offer to contract.

2. When is the offer to contract accepted?

3. What is a binder? When do binders become effective?

4. Why does contract law require “unequivocal manifestation of both parties’ mutual assent, by either words or conduct”?

5. What are the necessary terms in insurance contracts?

6. In what scenario does delivery of the insurance policy bind the insurer?

Educational Objective (EO) -- Insurance as Third-Party Beneficiary Contract

Describe under what circumstances a third party can benefit from an insurance contract.

Describing Insurance as a Third-Party Beneficiary Contract

Do contracts typically benefit a third party? Why or why not? Give an example of a type of insurance that can benefit a third party. (You



might repeat this several times to cover all the examples in the course materials.)

Educational Objective (EO) -- Representations and Warranties in Insurance

Explain how representations and warranties affect the creation and voidability of an insurance contract.

Explaining Representations and Warranties in Insurance

Contracts

False representations Misrepresentations Warranties

Develop a scenario that illustrates how their assigned topic affects an insurance contract. Specifically, the scenario should show the impact on creating a contract, or avoidance of a contract.


Documents of Title—Activities 16

Educational Objective (EO) -- Waiver, Estoppel, and Election

Explain how the following concepts legally prevent an insurer from reviving a defense it has forfeited earlier:

• Waiver

• Estoppel

• Election

______________________________________________________________________ What types of rights and privileges are typically waived by insurers? Give some examples of waivers precluding an insurer from denying a claim or

suit. How is estoppel different from waiver? Give examples of election by an insurer, and an insured.

Educational Objective (EO) -- Nonwaiver Agreements and Reservation of Rights Letters

Explain how nonwaiver agreements and reservation of rights letters affect insurers’ and insureds’ rights.

Explaining How Nonwaiver Agreements and Reservation of Rights Letters

Affect Rights

What is a nonwaiver agreement? What is a reservation of rights letter? Why does an insurer use a reservation of rights letter? What is the benefit to

the insurer? Why does an insurer use a nonwaiver agreement? What should happen if the insured refuses to sign the nonwaiver agreement? What are the requirements for nonwaiver agreements and reservation of

rights letters?
