Term
| What types of consideration can make a promise enforceable? |
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Definition
The consideration necessary to make a promise enforceable can be one of the following:- A return promise
- An act performed
- A forbearance from acting
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Term
| In what situations can a debtor's paying only part of a debt be binding on the creditor to forgive the entire debt? |
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Definition
A debtor's paying only part of a debt can be binding on a creditor under the following circumstances:- In bona fide disputes when each party agrees to surrender a claim
- Payment before a debt is due
- Accord and satisfaction
- Composition of creditors
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Term
| Identify exceptions to the consideration requirement for contracts. |
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Definition
Exceptions to the consideration requirement include the following:- Promissory estoppel
- Charitable subscriptions
- Specific exceptions under the UCC provisions
- State statutory exceptions
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Term
| Distinguish the kind of valuable consideration that will support a property-casualty insurance contract from that which will support a life insurance policy. |
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Definition
| In property-casualty insurance, prepaying the premium is not a condition necessary to make the contract valid, so that if an insured suffers a loss before paying the premium at the outset of a policy period, an insurer cannot refuse to pay damages based on failure of consideration. However, payment of the entire premium becomes an obligation as soon as the coverage begins. On the other hand, a life insurance policy or application provides that the insurance will not take effect until the purchaser pays the first full premium. Nonpayment can result in forfeiture of policy rights. |
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Term
| List types of illegal contracts. |
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Definition
Types of illegal contracts are as follows:- Contracts to commit crimes or torts
- Contracts harmful to the public interest
- Usury contracts
- Wagering contracts
- Contracts by unlicensed practitioners
- Contracts violating Sunday laws
- Contracts attempting to transfer one's negligence or liablity
- Contracts restraining marriage
- Contracts restraining trade
- Unconscionable bargains
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Term
| Are exculpatory clauses always illegal? Explain. |
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Definition
| Exculpatory clauses are often, but not always, illegal, particularly when a party is at a bargaining disadvantage. Courts interpret them narrowly against the parties attempting to limit their own liability. |
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Term
| Under what circumstances are noncompetition agreements valid? |
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Definition
| Noncompetition agreements are valid only when they contain restrictions that are necessary to protect the parties and if they impose no undue hardship on the restricted party. |
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Term
| Give three examples of possible illegality in insurance contracts. |
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Definition
Three examples of possible illegality in insurance contracts are as follows:1. The contract covers contraband 2. The insured has no insurable interest in the property or life covered 3. The insured is allowed to profit from his or her wrongful contract |
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Term
| List the conditions under which an illegal contract might still be totally or partially enforceable. |
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Definition
The conditions under which an illegal contract might still be totally or partially enforceable include the following:- Applicability of protective laws
- In pari delicto agreements
- Severable contracts
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Term
| List the situations in which genuine assent to contract may be absent. |
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Definition
Genuine assent to contract may be absent in the following situations:- Fraud
- Mistake
- Duress
- Undue influence
- Innocent misrepresentation
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Term
| Explain the material fact element of fraud. |
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Definition
| The material fact element of fraud requires that the misleading statement involve a material fact, that is, a fact that a party would consider important in deciding on a course of action. |
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Term
| Describe two situations of fraud in insurance contracts. |
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Definition
| Two situations of fraud in insurance contracts include collusing and concealment. Collusion is an agreement by two or emore people to defraud another person. Concealment is misrepresentation by silence. |
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Term
| Under what circumstances is concealment a defense to an insurance contract? |
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Definition
Concealment is a defense to an insurance contract under the following circumstances:- The insured knew that the fact concealed was material
- The insured concealed the fact with the intent to defraud
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Term
| Is a unilateral mistake ordinarily a defense to a contract? |
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Definition
| No, a unilateral miskate is ordinarily not a defense to a contract. |
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Term
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Definition
| Reformation is an equitable remedy with which the court rewrites, or reforms, a contract to reflect the parties' intentions. |
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Term
| What effect do mistakes of law have on the binding nature of a contract? |
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Definition
| Mistakes of law, whether unilateral or bilateral, do not affect the binding nature of a contract, particularly when the law is not clear. |
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Term
| Under what circumstances may duress permit the avoidance of a contract? |
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Definition
| Duress can permit avoidance of a contract when the wrongdoer deprived the plaintiff of free will in entering the agreement. |
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Term
| Under what circumstances may undue influence permit the avoidance of a contract? |
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Definition
| Undue influence can permit avoidance of a contract when it results in lack of genuine assent to a contract, usually in confidential relationships in which one party exercises some control and influence over the other. |
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Term
| What is the effect of an innocent misrepresentation relating to a contract? |
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Definition
| If an innocent misrepresentation relates to a material fact and results in a lack of genuine assent, the victim can ask a court to rescind the contract. |
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