Question 1

What constitutes the consideration to the guarantor in a contract of guarantee?

Accepted Answer

Occasionally there is an economic benefit,but more commonly it is the performing of some act or the forbearance of some deed at the request of the guarantor.

Question 2

Exemption clauses in insurance contracts are strictly interpreted by the courts.

Accepted Answer

A) True 
 B)False  True

Question 3

Larson had a fire last month in his sportswear shop.Luckily he had "business interruption insurance." This insurance will NOT pay for

Accepted Answer

A) lost profits during the time the shop is closed. 
B) reduction in the value of inventory. 
C) overhead expenses while the shop is closed. 
D) cost of moving to temporary accommodations. 
E) money expended to reduce business losses. 
A) lost profits during the time the shop is closed. 
B) reduction in the value of inventory. 
C) overhead expenses while the shop is closed. 
D) cost of moving to temporary accommodations. 
E) money expended to reduce business losses. B

Question 4

James was the guarantor for a loan Edward had at the bank.Edward had also pledged a coin collection as security for the loan.The loan came in default,so James made the remaining payments.Who gets the coin collection?

Accepted Answer

A) The bank does,since it is the bank's loan that was defaulted. 
B) James does,since the coin collection is his consideration for the guarantee. 
C) James does,since he has the right of subrogation. 
D) Edward does,since the loan is now fully paid up. 
E) James does,since he has the right of set-off. 
A) The bank does,since it is the bank's loan that was defaulted. 
B) James does,since the coin collection is his consideration for the guarantee. 
C) James does,since he has the right of subrogation. 
D) Edward does,since the loan is now fully paid up. 
E) James does,since he has the right of set-off.

Question 5

If a material change in risk occurs after a fire insurance policy has been entered into,what must the insured do in order to maintain his or her coverage? When this occurs,what options does the insurer have?

Accepted Answer

When a material change of risk occurs in

Question 6

Contracts of insurance contain statutory terms that require,for example,that the insured give prompt notice to the insurer of any loss suffered by the insured.If the insured fails to meet such terms,what effect does it have on the contract of insurance?

Accepted Answer

If one breaches a statutory or other ter

Question 7

When the parties agree to a change in the terms of an existing insurance contract,they may do so by attaching a separate paper called

Accepted Answer

A) an amendment. 
B) a supplement. 
C) an endorsement. 
D) a recommendation. 
E) a rider. 
A) an amendment. 
B) a supplement. 
C) an endorsement. 
D) a recommendation. 
E) a rider.

Question 8

Sam needs a loan for his carpet business.The bank agrees to make him a loan provided that his wife Pam gives the bank a personal guarantee agreeing to be responsible is there is default under the loan agreement.Pam signs a guarantee for the loan.Sam defaults under the loan agreement and the bank sues Pam on the personal guarantee.Pam's defence is that there was no consideration for the guarantee because she had no ownership or financial interest in her husband's business,and she received none of the loan proceeds.Is she correct that she is not bound by the guarantee because there is no consideration?

Accepted Answer

In order for there to be consideration,i

Question 9

Define the term "insurable interest" and state the effect on the insured where he or she does not have an insurable interest.

Accepted Answer

An insurable interest requires a genuine

Question 10

In June,Ken developed glaucoma,a condition of the eyes that if untreated results in blindness.By August,Ken was legally blind,yet he continued to drive.He informed neither the Ministry of Transportation nor his insurance company of the changed condition of his eyes.On September 12,he got into a serious automobile accident where he was driving and was at fault.Will the insurance company need to pay this claim?

Accepted Answer

A) Yes,it will,because he had a valid driver's licence. 
B) Yes,it will,because the policy had not been changed or cancelled. 
C) No,it won't,because "utmost good faith" is required. 
D) No,it won't,because his drivers licence would be void. 
E) No,it won't,because the insurer was not notified of the change in risk. 
A) Yes,it will,because he had a valid driver's licence. 
B) Yes,it will,because the policy had not been changed or cancelled. 
C) No,it won't,because "utmost good faith" is required. 
D) No,it won't,because his drivers licence would be void. 
E) No,it won't,because the insurer was not notified of the change in risk.

Question 11

C guarantees the loan of A to Happy Bank.The guarantee provides that before the bank can sue C,it must give C notice.A defaults on the loan and the bank simply sues A and C.In this case,

Accepted Answer

A) C will be liable because A is party to the proceedings. 
B) C will be liable on the guarantee. 
C) C will not be liable because only A as principle debtor is liable. 
D) C will not be liable because the bank made material changes to the guarantee. 
E) C will not be liable because the bank breached the terms of the guarantee. 
A) C will be liable because A is party to the proceedings. 
B) C will be liable on the guarantee. 
C) C will not be liable because only A as principle debtor is liable. 
D) C will not be liable because the bank made material changes to the guarantee. 
E) C will not be liable because the bank breached the terms of the guarantee.

Question 12

Why it is important for a contract of guarantee to be in writing and signed by the guarantor?

Accepted Answer

Since there is usually a lapse of time b

Question 13

Property insurance is not assignable without

Accepted Answer

A) consent of the insured. 
B) novation. 
C) subrogation. 
D) acceptance of new policy holder. 
E) promise of indemnity. 
A) consent of the insured. 
B) novation. 
C) subrogation. 
D) acceptance of new policy holder. 
E) promise of indemnity.

Question 14

Uncle Ralph told Jody's parents,"Supply Jody with what she needs to get off to a good start at university and I'll take care of all the bills." Legally,we identify Uncle Ralph as

Accepted Answer

A) Jody's educational guarantor. 
B) the maker of a promise of indemnity. 
C) Jody's sponsor. 
D) the guarantor of all university bills. 
E) the one to provide a guaranteed education. 
A) Jody's educational guarantor. 
B) the maker of a promise of indemnity. 
C) Jody's sponsor. 
D) the guarantor of all university bills. 
E) the one to provide a guaranteed education.

Question 15

Edward is the principal shareholder in Family Company,which has a loan with Nasty Bank.The company is experiencing financial difficulties that are making it difficult to pay off the loan on time.However,the bank tells the company that if Edward,as principal shareholder,guarantees the loan,it will give the company one more year to pay off the loan.A couple of weeks later and after Edward has given his guarantee to the bank,the branch of the bank that extended the loan has a change of managers.When the new manager sees the poor financial health of the company,he makes a demand for immediate payment on both the company and Edward and puts the company into receivership.In this case,if the bank decides to sue Edward and the company,

Accepted Answer

A) the company will be liable on its loan and Edward will be liable on his guarantee. 
B) Edward will be liable as principal shareholder. 
C) Edward will not be liable on his guarantee,because there was a material change in the term of the loan. 
D) Edward will be liable on his guarantee so long as the bank sues the company first. 
E) Edward will not be liable on his guarantee,which was discharged by the bank manager's arbitrary actions. 
A) the company will be liable on its loan and Edward will be liable on his guarantee. 
B) Edward will be liable as principal shareholder. 
C) Edward will not be liable on his guarantee,because there was a material change in the term of the loan. 
D) Edward will be liable on his guarantee so long as the bank sues the company first. 
E) Edward will not be liable on his guarantee,which was discharged by the bank manager's arbitrary actions.

Question 16

The right of subrogation does not apply in all cases,but it is presumed to apply if it is not expressly excluded.

Accepted Answer

A) True 
 B)False

Question 17

Why is obtaining insurance important for most businesses?

Accepted Answer

It minimizes the liability of a business

Question 18

As between a principal debtor and a guarantor,what are the rights of the creditor on the principal debtor's default,and why are they important?

Accepted Answer

The creditor can choose to sue the princ

Question 19

A guarantee occurs when a third party agrees to pay off a loan made to another.

Accepted Answer

A) True 
 B)False

Question 20

In the case of Demeter v.Dominion Life Assurance Co. ,a husband applied to the court as owner and beneficiary of a policy of life insurance for payment of the proceeds as a result of the death of his wife.She died because he murdered her.Why will courts not enforce a contract of insurance in these circumstances?

Accepted Answer

Where the claim for insurance proceeds a

Exam 16: Insurance and Guarantee

What constitutes the consideration to the guarantor in a contract of guarantee?

Exemption clauses in insurance contracts are strictly interpreted by the courts.

Larson had a fire last month in his sportswear shop.Luckily he had "business interruption insurance." This insurance will NOT pay for

James was the guarantor for a loan Edward had at the bank.Edward had also pledged a coin collection as security for the loan.The loan came in default,so James made the remaining payments.Who gets the coin collection?

If a material change in risk occurs after a fire insurance policy has been entered into,what must the insured do in order to maintain his or her coverage? When this occurs,what options does the insurer have?

Contracts of insurance contain statutory terms that require,for example,that the insured give prompt notice to the insurer of any loss suffered by the insured.If the insured fails to meet such terms,what effect does it have on the contract of insurance?

When the parties agree to a change in the terms of an existing insurance contract,they may do so by attaching a separate paper called

Define the term "insurable interest" and state the effect on the insured where he or she does not have an insurable interest.

C guarantees the loan of A to Happy Bank.The guarantee provides that before the bank can sue C,it must give C notice.A defaults on the loan and the bank simply sues A and C.In this case,

Why it is important for a contract of guarantee to be in writing and signed by the guarantor?

Property insurance is not assignable without

Uncle Ralph told Jody's parents,"Supply Jody with what she needs to get off to a good start at university and I'll take care of all the bills." Legally,we identify Uncle Ralph as

The right of subrogation does not apply in all cases,but it is presumed to apply if it is not expressly excluded.

Why is obtaining insurance important for most businesses?

As between a principal debtor and a guarantor,what are the rights of the creditor on the principal debtor's default,and why are they important?

A guarantee occurs when a third party agrees to pay off a loan made to another.

Law, society, and Business

The Machinery of Justice

Government Regulation of Business

The Law of Torts

Professional Liability: the Legal Challenges

Formation of a Contract: Offer and Acceptance

Formation of a Contract: Consideration and Intention

Formation of a Contract: Capacity to Contract and Legality of Object

Grounds Upon Which a Contract May Be Set Aside: Mistake and Misrepresentation

Writing and Interpretation

Privity of Contract and the Assignment of Contractual Rights

The Discharge of Contracts

Breach of Contract and Its Remedies

Sale of Goods and Consumer Contracts

Bailment and Leasing

Agency and Franchising

The Contract of Employment

Negotiable Instruments

Intellectual Property

Interests in Land and Their Transfer

Landlord and Tenant

Mortgages of Land and Real Estate Transactions

Sole Proprietorships and Partnerships

The Nature of a Corporation and Its Formation

Corporate Governance: the Internal Affairs of Corporations

Corporate Governance: External Responsibilities

Secured Transactions

Creditors Rights

International Business Transactions

Electronic Commerce

Privacy

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