Module 1, Lesson 3 Flashcards
Contract
A legally enforceable agreement between two or more parties.
Lapse
The termination of an insurance policy for nonpayment of premium.
Unilateral Contract
A contract in which only one of the parties makes a legally enforceable promise when entering into the contract.
Bilateral Contract
A contract in which both parties make legally enforceable promises when they enter into the contract.
Commutative Contract
A contract under which the parties specify in advance the values that they will exchange; moreover, the parties generally exchange items or services that they think are of relatively equal value.
Aleatory Contract
A contract under which one party provides something of value to another party in exchange for a conditional promise.
Conditional Promise
A promise to perform a stated act if a specified, uncertain event occurs; if the event does not occur, the promise will not be performed.
Bargaining Contract
A contract in which both parties, as equals, set the terms and conditions of the contract.
Contract of Adhesion
A contract that one party prepares and that the other party must accept or reject as a whole, generally without any bargaining between the parties to the agreement.
Informal Contract
A contract that is enforceable because the parties to the contract met requirements concerning the substance of the agreement rather than requirements concerning the form of the agreement.
Formal Contract
A contract that is enforceable because the parties met certain formalities concerning the form of the agreement.
Valid Contract
A contract that is enforceable at law because it satisfies all legal requirements.
Void
Something that was never valid. A void contract is one that was never enforceable at law.
Voidable Contract
A contract in which a party has the right to avoid obligations under the contract without incurring legal liability.
Mutual Assent
A meeting of the minds about the terms of an agreement.
Consideration
A requirement for the formation of a valid contract that is met when each party gives or promises something that is of value to the other party.
Lawful Purpose
No contract can be made for a purpose that is illegal or against the public interest.
Contractual Capacity
The legal capacity to make a contract.
Initial Premium
The first premium paid for an insurance policy.
Applicant’s Consideration
If the applicant had not paid the initial premium, she would not have provided consideration and no contract would exist.
Renewable Premiums
Renewal premiums payable to keep the policy in force are not consideration for the formation of the contract but a condition necessary for the continuation of the contract.
Legally Adequate Consideration
The rules of contract law don’t require the parties to exchange equal consideration. Whatever is of value to the parties generally is considered to be legally adequate consideration.
Insurable interest
The interest that an insurance policyowner has in the risk that is insured. A policyowner has an insurable interest if she is likely to suffer a genuine loss or detriment should the event insured against occur.
