General Principles Ch 10 Flashcards
Business Law / Consumer Protection Laws
Enforceable agreements between two or more parties
Contracts
Certain elements must apply for a contract to be legally enforceable:
An agreement preceded by ___________________.
Something of value must be exchanged in _____________ of the object of the contract.
The principal must have ______________ to execute contracts.
The contract must be for a ______________.
an offer and an acceptance
consideration
legal capacity
lawful purpose
Incompetent or intoxicated adults have _______________ capacity to execute contracts.
limited or no
Minors have capacity to contract for ________________ only.
Necessities (e.g. food, clothing, shelter)
Courts _________ enforce a contract that asks either or both parties to do something illegal.
will not
A __________ contract was never valid. It is not enforceable because it lacks one or more of the necessary elements.
VOID
A _________ contract is where one party has the option of voiding the contract if desired while the other party is bound by the contract.
VOIDABLE
Where one of the parties to a contract is legally incompetent because of age, illness, or inebriation, the contract is ______ but may be ____________.
valid / voided by the incompetent party.
A legal representative of an insurance company with express, implied, or sometimes apparent authority to act on behalf of the insurer (the insurance company).
Agent
A marketing intermediary between the insurer and the policy owner who represent the policy owner rather than the insurance company.
Broker
Written, explicit direction from principal (the insurance company) to the agent.
Express authority
That which the public believes the individual has and is based on such indicators as signage, rate books, etc. Actual authority the agent has to carry out the principal’s business in accordance with general business practices.
Implied authority
arises out of the negligence of the principal allowing the agent to appear to have the authority because of certain past action of the agent.
apparent authority
Evidence of a temporary contract obliging a life insurance company to provide coverage as long as a premium accompanies an acceptable application
conditional receipt
Compliance with the rules of the insurance company (the principal) falls under the _____________.
Law of Agency
Actions of brokers’ authority __________ extend to insurers.
does not
True or False:
A broker is generally authorized to bind coverage only within specific limits.
FALSE. The broker cannot make insurance effective. The broker is not party to the insurance contract.
A ________ is a person, company, or association holding assets in trust for a beneficiary; charged with the responsibility of investing the money wisely for the beneficiary.
Fiduciary
CFP Certificates, Executors of wills and estates, Receivers in bankruptcy, Trustees, Financial Planners, and PHYSICIANS are all examples of _______________.
Fiduciaries (Investopedia)
A fiduciary is a person or organization that acts on behalf of another person or persons, putting their clients’ interests ahead of their own, with a duty to preserve good faith and trust. Being a fiduciary thus requires being bound both legally and ethically to act in the other’s best interests.
A fiduciary may be responsible for the general well-being of another (e.g., a child’s legal guardian), but the task often involves finances—for example, managing the assets of another person or a group of people.
The __________ is a guideline for making financial decisions using the principles of common sense and reasonable risk.
The rule is commonly cited for trustees and guardians tasked with administering assets on behalf of others.
Federal rules for pension fund managers contain similar cautions against reckless investing.
prudent-person rule
Bankruptcy for individuals who do not qualify under Chapter 13 because they exceed the debt limitations or do not have a regular source of income
Chapter 11
Reorganization; Payments to creditors are typically reduced to be more manageable. Creditors cannot harass the debtor. The debtor is generally not required to relinquish assets.
Chapter 13
Permits a debtor to claim either the “federal” exemptions or the exemptions available under state law. 33 states have opted out of Federal exemptions.
Chapter 7
The following types of debts are/are not generally cancelable by bankruptcy:
Student and government loans
Wage withholding and FICA obligations/recent income taxes due
Child support and alimony
ARE NOT
Under federal bankruptcy laws, if the debtor’s average monthly net income for 60 months is > _________, Chapter 7 bankruptcy is not an option.
$10,000
If the debtor’s average monthly net income for 60 months is < _________, Chapter 7 bankruptcy is an option.
$6,000
If net monthly income is between $6,000 and $10,000, then the debtor can file under Chapter 7, if net monthly income is _______of all non-priority unsecured debt.
< 25%
With regards to bankruptcy, funds in a traditional or Roth IRA (contributory) are now exempt up to ____________. For a Rollover IRA, the exemption is ________. If the IRA income exceeds a debtor’s need, it is not exempt.
$1 million / unlimited.
Does bankruptcy law make it safer to rollover 401(k) funds into an IRA account or to leave the funds in the 401 (k)?
ERISA protection applies regardless of state law. The IRA may only afford limited protection under bankruptcy law (state dependent).
Lost or stolen credit cards have limited liability of _____ per card.
$50
