CPCU 530 Practice Exam 2

1. Executive Order 11246 prohibits employers with federal contracts from:

2. The parol evidence rule is a rule of evidence that limits terms of a written contract to those terms expressed in writing. Under this rule, a party may:

3. If a dispute arises between the insurer and the insured with respect to the meaning of certain policy terms, the courts usually rule in favor of the insured because:

4. When an insurer that knows of grounds for forfeiture manages the defense of a lawsuit against the insured without giving timely notice of its reservation of rights, the insurer:

5. If a contract for the sale of goods does not contain a stated sales price for the goods, the contract is:

6. Marvin is an insurance agent who has insurance contracts with a variety of insurers. He does not have a contract with InsureCo. Marvin recently sent business to InsureCo, and InsureCo issued policies, sending the appropriate commission to Marvin. InsureCo also sent Marvin application forms so Marvin could solicit more business for InsureCo. Which one of the following statements is correct regarding Marvin’s authority?

7. Vince hired Becky to bid on an autographed baseball at an auction. He told her not to bid more than $1,500. Becky won the baseball at the auction, but her winning bid was $4,000, which she paid to the auction company. She gave the baseball to Vince, who accepted it. Vince must pay Becky:

8. Donna said to her friend Ron, “I will not sell my property for less than $5,000.” Ron then replied, “I accept your offer.” In this situation, a contract:

9. Stacy dropped her clothing off at the dry cleaner for cleaning and pressing. One night, when the dry cleaner was closed, a truck crashed into the premises, destroying Stacy’s clothes. The dry cleaner can avoid liability for the destroyed clothes if it can show that it exercised the appropriate level of care regarding the property. In this scenario, the appropriate level of care is:

10. Company 1 is in the process of taking over ownership of Company 2. To facilitate the takeover, Company 1 offers to purchase the stock of Company 2 directly from the shareholders of Company 2 at a price in excess of the market value. This strategy for achieving a takeover is known as a:

11. Which one of the following would represent a private nuisance?

12. In the case of an undisclosed principal, liability is limited to the:

13. Which one of the following statements is correct regarding the ways unincorporated associations differ from partnerships?

14. Which one of the following statements is correct regarding tort liability of principals and agents?

15. An insurance producer is limited in authority only to drumming up insurance applications and forwarding them to the insurance company. This producer is a:

16. Trevor writes to Tina, a real estate broker, and asks her to sell his house. He indicated “no response was necessary to this letter.” Tina did not respond to the letter. Tina sold Trevor’s house, and Trevor accepted the transaction. This represents an agency by:

17. Two individuals contributed a total of $3,000,000 capital and loaned $5,000,000 to a start-up corporation. They created the corporation to advance their own private interests and commingled their business and personal investments. Other similar companies typically require $3,000,000 of start-up capital. The corporation may lose their limited liability due to:

18. Marcus hired Smith Plumbing to perform some plumbing work in his home. A pipe that Smith Plumbing installed burst, causing damage to Marcus’ kitchen and living room one afternoon. Marcus filed a negligence lawsuit against Smith Plumbing for damage to the kitchen. Marcus will be precluded from filing a second lawsuit against Smith Plumbing for damage to the living room due to the doctrine of:

19. An agent makes an offer to a customer for health insurance for a certain premium amount. The customer fills out the application, and the agent sends it in. The insurance company sends a policy back with coverage and premiums that are different than the original offer. The customer accepts the policy without looking at it and pays the premium. Which one of the following statements is correct?

20. Donna invited her friend, Candice, to spend the weekend at her cabin in the woods. While at the cabin, Candice was going for a walk when she tripped over an exposed tree root on Donna’s property. Although she was not injured, Candice sued Donna for negligence. Which one of the following represents the most likely reason Candice will not be successful?

21. Which one of the following cannot be discharged in bankruptcy?

22. If an insurance producer fails to fully disclose all matters concerning the risks and hazards of a prospective insured:

23. Which one of the following represents the reason insurance contracts involve the exchange of unequal amounts?

24. Which one of the following best describes a conditional sale?

25. A party initiates a lawsuit by filing a complaint. Which one of the following represents an element of a complaint?

26. Sophia purchased a ticket to the opera. The ticket represents what type of interest?

27. Cory’s tree snapped and fell into the street, blocking one lane of traffic heading West. Three hours later, Jim was driving West on the street and talking on his cell phone. Jim saw the tree lying in the street, but he made no attempt to avoid it and his car struck the tree, causing damage to his car. If Jim sues Cory for negligence, which defense could Cory invoke to potentially avoid liability?

28. Alexa, who lives in Dallas, interviewed for a job in Oregon with Susan, who owns a clothing company. After the interview, Susan offered Alexa a job, and she accepted. Alexa incurred considerable costs in moving her household goods to Oregon. When she arrived at the clothing company, Susan reneged on her job offer. Can Alexa sue for damages?

29. Rick plans on purchasing a tract of land without inspecting the land first. Which one of the following would be the most desirable type of deed for Rick to obtain on the property?

30. Adam, a long-term employee of ABC Company, was fired without just cause exactly one month before becoming eligible for retirement benefits. He did not have an employment contract with ABC Company. Assuming all of the following exceptions to the employment at will doctrine are accepted in Adam’s state of employment, and state law does not address termination prior to retirement, which one of the following exceptions would most likely allow Adam to be successful in a lawsuit against ABC Company?

31. In order to support a valid contract, what type of consideration is necessary?

32. To be effective, an insurance agreement, whether oral or written, must have which one of the following components?

33. An attorney realized that many individuals were injured using a defective product. The attorney would like to represent all of the individuals in a lawsuit. What type of lawsuit would the attorney most likely file?

34. Which one of the following would typically cause an agency relationship to terminate?

35. Under the public policy exception to the employment-at-will doctrine, an employee cannot be fired for reasons that violate established public policy of the state. Which one of the following would be considered a reason that would fall under the public policy exception?

36. If an attorney believes a defendant is capable of lying on the witness stand during trial, what would be the most effective tool that could be used by the attorney?

37. Tom, who owns a house, learned the previous day that his neighbor Jennifer was getting new sprinklers. That morning, Tom sees the plumber mistakenly installing the sprinklers in his own lawn. Tom says nothing, and then refuses to pay when the plumber hands him the bill, claiming that he never agreed to pay for the sprinklers. If the plumber can prove that Tom knew that the sprinklers were being installed mistakenly on his property and failed to prevent the installation, the court could make Tom pay for the sprinklers, based on:

38. Charlie coerces Jenny to enter into a contract by threatening to report to the police a crime that Jenny’s daughter committed. The contract may not be enforceable because it was entered into by Jenny under:

39. Which one of the following statements is correct regarding nonwaiver agreements and reservation of rights letters?

40. Christina loaned Mikaela $1,000. In return, Mikaela gives Christina title to her car as collateral. This is an example of a:

41. A binder is used to provide insurance coverage until a formal written policy is issued. Which of the following must be included in a binder for property insurance?

42. Which one of the following statements is correct regarding contract interpretation?

43. The most common remedy for a breach of contract is:

44. What standard of care does a landowner owe a trespasser in regard to natural conditions?

45. Which one of the following constitutes the tort of assault?

46. To gain the upper hand during negotiations, the auto plant union encouraged 10 workers each day to call in sick. Is this an effective economic pressure tactic?

47. Which one of the following represents rights typically delegated to the officers of a corporation?

48. Which one of the following terms of sale would cause the buyer of merchandise to assume responsibility for a loss as soon as the merchandise is placed alongside the transportation vessel at the port named in the terms?

49. Which one of the following rights is assignable without the obligor’s consent?

50. The justification for imposing strict liability on those who carry on ultrahazardous activities is that they have, for their own purposes: