Chapter 3

Question 1

define a contract

Answer 1

a legally enforceable agreement between two or more parties. This means the parties are bound to the promises they made.
> Insurance policy is a contract, and describes the terms of the agreement.

Question 2

what make s a contract valid?

Answer 2

a contract that is enforceable at law because it satisfies all legal requirements.

Question 3

what is a void contract?

Answer 3

a contract that does not meet one or more of the legal requirements to create a valid contract, and thus is never enforceable

Question 4

what is a voidable contract?

Answer 4

a contract under which on party has the right to avoid his obligations under the contract.

Question 5

what makes a contract formal?

Answer 5

its enforceable becuase the parties met certain formalities concerning the form of the agreement. it must be in writing and contain some form of seal
> land contracts

Question 6

What makes a contract informal?

Answer 6

enforceable because the parties to the contract met requirements concerning the substance of the agreement rather than requirements concern the form of the agreement.
> most insurance contracts

Question 7

what are the 4 requirements for an informal contract?

Answer 7

1. parties must express mutual assent, to the terms of the contract
2. parties must exchange legally adequate consideration
3. the contract must be for a lawful purpose
4. parites must have contractual capacity.

Question 8

define mutual assent [agreement].

Answer 8

meeting of the minds about the terms of the agreement.
> its expressed by means of an offer and an acceptance. All paties must clearly indicate that hey intend to be bound by the terms.

Question 9

define legal adequate consideration

Answer 9

this is required for an informal contract to be valid. This means that each part must give or promise something of value to the other party

Question 10

what is mean by lawful purpose?

Answer 10

an insurable interest be present when a policy is issued and provides assurance that a life insurance contract is being made for a lawful purpose.

Question 11

in most jurisdictions, who are the majority of people who have limited contractual capacity?

Answer 11

1) minors

2) lack mental capacity

Question 12

define the two situations that can arise in which a person;s lack of mental capacity affects her contractual capacity.

Answer 12

1) court declares the person to be insane or mentally incompetent.
2) the person’s mental competence is impaired, but had not been declared insane or mentally incompetent by a court. (intoxicated or impaired)

Question 13

what is a bilateral contract

Answer 13

where both parties make legally enforceable promises when they enter into the contract.

Question 14

what type of contract [name] requires only one party to make a legally enforceable promise when entering into the contract

Answer 14

unilateral contract

Question 15

What type of contract is an insurance policy? [bilateral vs. unilateral]

Answer 15

unilateral.

Question 16

what is a commutative contract?

Answer 16

An agreement under which the parties specifically in advance the values that they will exchange.
- they tend to exchange items or services that they think are relatively equal value

Question 17

what is an aleatory contract?

Answer 17

contract under which one party provides something of value to another party in exchange for a conditional promise.

Question 18

what is a conditional promise?

Answer 18

a promise to preform a stated act if a specified, uncertain event occurs.

Question 19

is an insurance contract a commutative contract or an aleatory contract?

Answer 19

aleatory - the promise to pay the policy benefits is specified in advance and is contingent on the death of the insured

Question 20

what is a contract of adhesion?

Answer 20

its a contract that one party prepares and the other party must accept or reject as a whole. It is not bargained between the parties.