3 Mark Questions

Question 1

What are the 3 purposes of INCOTERMS?

Answer 1

1. The point in transit at which the seller has fulfilled its obligation.
2. Which of the buyer or seller is responsible for carriage from one point to another.
3. Which of the buyer or seller is responsible for insurance.

Question 2

EXWORKS

Answer 2

The buyer is responsible for the goods as soon as it leaves the factory (carriage and insurance).

Question 3

FOB (Free on Board)

Answer 3

The seller is responsible for the goods from the time it leaves the factory to when the goods are on the boat (carriage and loading). Buyer responsible as soon as on boat and unloading and carriage. As well as insurance.

Question 4

FAS (Free Along Side)

Answer 4

Buyer responsible until goods are alongside the vessel. Seller responsible for loading/unloading as well as carriage and insurance.
Seller should have insurance remain until goods are paid for.

Question 5

What are the 3 purposes of Bill’s of Lading?

Answer 5

1. As a contract of carriage between shipper and ship owner.
2. As a receipt for the goods.
3. As a document of title to the goods.

Question 6

What are the common characteristics of an open policy (marine)?

Answer 6

• sums insured are not stated
• can be extended to include property of every description, anywhere in the world
• policy can be issued with no expiry
• premium rate is stated on the policy

Question 7

What does plus 10% mean under the valuation clause?

Answer 7

Helps to ensure that normal increases in the value of cargo to the consignee arising out of the journey are insured.

Also helps to provide a means of insuring loss of profit margin when goods are damaged or fail to arrive at their destination.

Question 8

What is percentage of insured value lost?

Answer 8

If damage estimated to be approximately 40% of the value of the goods without damage, then 40% of insured damage is paid for the loss. The face of the policy is always paid in the event of a total loss.

Applies penalties when underinsured. Provides overpayment if over insured.

Question 9

3 exclusions to marine cargo policies?

Answer 9

• unseaworthiness and unfitness exclusion clause
• war exclusion clause
• strikes exclusion clause

Question 10

Actual total loss vs constructive total loss

Answer 10

Actual total loss is one where all property has been totally lost or the there is so much damage that no value left

Constructive total loss is when the cost of salvaging the cargo is too high relative to the value saved

Question 11

Unapproved pilots on policies are not covered except in these 3 instances:

Answer 11

1. Being tested by a pilot employed by Trans Canada
2. Being operated by a pilot providing an approved pilot with upgrading flight instruction
3. When not in flight, the aircraft may be started and operated by a person who is competent to control the aircraft and qualified to do so

Question 12

What is required to underwrite air
Risks?

Answer 12

1. Class of license and endorsements
2. Total hours as pilot in command
3. Record of any accidents in the previous 5 year period

Question 13

The 3 c’s to qualify for a surety bond?

Answer 13

• character (their reputation, pays bills)
• capacity (past customers happy, good reviews)
• capital (how are the numbers)

Question 14

3 important characteristics of guarantee made by surety?

Answer 14

• promise made to the obligee,
  not the principal
• a secondary obligation arising only on the default of the principal
• surety’s duty to pay arises immediately upon default of the principal

Question 15

What methods are available for surety to collect amounts owed by principal?

Answer 15

• assignment to surety of obligee’s rights
• right of subrogation

Question 16

What are 3 risks owners face without the protection of bonds?

Answer 16

• the refusal or inability of
  The successful bidder to enter into a contract
• the failure of the contractor to complete the project at the contract price
• the inability of the contractor to pay subcontractors and suppliers

Question 17

What determines if the general contractor will want bonds from subcontractors?

Answer 17

• the terms of the contract with obligee
• the relationship between contractor and subtrade
• the value of the subcontract
• subtrades price in relation to other bidders
• whether general contractor wishes to pay the cost of the bonds, rather than assume the risks associated with not doing so