Exam 16: Insurance and Guarantee

Nancy missed a payment on her signature loan to Pacific Bank.The bank threatened to bring her to court unless she could pledge some assets or find someone to be a guarantor.Nancy's friend Lynn agreed to sign as guarantor provided Nancy wouldn't tell Lynn's husband.In response to Lynn's promise,what is the necessary consideration for the guarantee?

The duty of good faith is owed by both the insured and the insurer,and applies to the making of the contract as well as its performance.

In May,farmer Smith sold one of his tractors to farmer Jones for $26 000.Smith received $6000 down and a 7 percent note payable (for $20 000)to be paid on October 15th.In need of cash,farmer Smith brought the note to his bank for discounting.The bank gave cash less 5 percent for the note,whereas farmer Smith endorsed the note in favour of the bank.Farmer Smith performed an act of

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

Where certain terms are changed in a policy,the document that records the changes is not an endorsement.

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?

Property insurance is NOT assignable without

Joe obtains a loan from a bank,and his wife,Mary,gives a personal guarantee as security.The guarantee is expressed as being a continuing guarantee.Two months later,Joe also obtains a line of credit from the same bank.This time Mary does not sign a guarantee.Mary is happy because she believes that the bank will not come after her if Joe defaults on the line of credit.Is Mary's belief true or false?

To be entitled to the proceeds of an insurance policy,a person must have an economic interest in the property that is the subject matter of the insurance policy.

While Stella was in Hong Kong,a loan came due that she had guaranteed.The creditor,a kindly old man,extended the due date on the loan for thirty days,interest free.Did this action by the creditor discharge Stella from her obligation?

A building owned by X Company is insured for $100 000,but the insurance contract contains an 80 percent co-insurance clause.The building is damaged by fire to the amount of $20 000.The depreciated replacement value of the insured property is $250 000.The insurance company will then pay

A wants to buy a building to use as a warehouse.A has seen the building he wants to buy and knows the purchase price is $500 000.00.A calls his agent and tells him he wants immediate insurance on the building.He gives him all the particulars and tells him to insure the building for $500 000.00,which the agent proceeds to do.After a month of negotiations,A finally enters into an agreement of purchase and sale,and two weeks later he becomes the owner of the building.A half a year later,the building is badly damaged by fire.In this case

Bill was a good friend of John and thought that John was gradually getting quite sickly.In fact it looked so serious that Bill thought John might lose his job due to depression and illness.Hoping to benefit from the situation,Bill purchased a life and disability policy on John.This policy would provide monthly payments to Bill if John was disabled due to illness.As it turned out,John was disabled due to illness,and pursuant to the terms of the policy of insurance,Bill made a claim under the policy.Will the insurance company pay Bill the monthly payments provided for under the policy? Explain your answer and comment on the applicable legal principles.

A wants to obtain life insurance for himself and contacts his insurance agent,who arranges the policy with an insurance company.A few days later,the insurance policy is issued and then it is delivered to A,but it requires him to pay the first premium,which he does.In this case,the contract is made

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

An offer to purchase life insurance is accepted when the agent provides the applicant with an insurance binder.

An insured owes an insurance company a duty of good faith.Insurance companies must also act with utmost good faith towards their insureds.The duty owed by the company to the insured requires,at the very least

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?

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