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Part 2: Legal Principles

Paper I — Principles and Practice of Insurance · Part 2: Legal Principles

Further reading: Legal Principles study notes →

Q1 Free

Under common law, what is the most accurate definition of a contract?

  • A. Any form of agreement between two or more parties
  • B. A legally enforceable agreement between two or more parties
  • C. A document that must be executed in writing
  • D. An oral promise involving a monetary transaction
Show Answer

Correct Answer: B

  • A contract is a legally enforceable agreement between two or more parties.
  • Not every agreement is a contract — it must have all essential elements (offer/acceptance/consideration etc.).
  • A is wrong because a mere agreement is not necessarily enforceable; C is wrong because simple contracts can be oral; D is wrong because contracts are not limited to monetary dealings.
Q2 Free

Which statement about a simple contract is correct?

  • A. Must be in writing and sealed
  • B. Can only be made orally
  • C. Can be oral, written, or partly oral and partly written
  • D. Must be witnessed by a lawyer
Show Answer

Correct Answer: C

  • A simple (parol) contract may be oral, written, or partly oral and partly written.
  • A describes a specialty contract (under seal), which must be in writing and sealed.
  • B is wrong because simple contracts are not limited to oral form; D is wrong because no lawyer witness is required.

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