CAIB 3 EXAM SCRIPT 2025/2026 QUESTIONS WITH
ANSWERS GRADED A+
✔✔Constructive Total Loss - ✔✔occurs when the cost of salvaging the cargo is too high
relative to the value saved.
✔✔Particular Average - ✔✔involves a partial loss to a specific shipment, other than a
General Average.
✔✔General Average - ✔✔deals with payment for marine losses voluntarily incurred for
the safety of the entire venture. The parties whose property was saved shall contribute
to the losses of the parties whose property was sacrificed.
✔✔Surety - ✔✔state of being sure, certain and secure.
✔✔Suretyship - ✔✔the guarantee of performance made by one person or entity for
another.
✔✔Surety Bond - ✔✔an undertaking by one party (the surety) to become accountable
to another party (the obligee) for the performance of an obligation or undertaking by a
third party (the principal). It is a promise to provide credit, if and when needed, to ensure
the faithful performance of an obligation.
✔✔Obligee - ✔✔the party to whom someone else is obligated under a contract.
or
the party to whom the bond is given.
✔✔Principal - ✔✔the person primarily liable.
✔✔Penalty - ✔✔the amount of credit given to the principal by the surety;
or
the amount which the surety is prepared to pay in the event the principal should default.
✔✔Statutory Bond - ✔✔one that is required by a municipal ordinance, or federal or
provincial regulation or statute.
✔✔Non-Statutory Bond - ✔✔not required by law but flows from the contract or
agreement between the parties.
✔✔Contract Bond - ✔✔guarantees the fulfillment of certain obligations required under
public and private contracts.
,✔✔Consent of Surety - ✔✔a letter assuring the owner that if the principal is the
successful bidder, the surety will issue such other bonds as are specified to ensure the
performance of the contract.
✔✔Working Capital - ✔✔the amount of funds available to pay continuing business
operating expenses until payment is received for work being undertaken by the
contractor.
✔✔Net Worth - ✔✔the amount of money remaining after all assets have been liquidated
and all liabilities cleared.
✔✔Licence - ✔✔issued by a regulatory body such as government in order to set rules
and regulations to safeguard the public.
✔✔Permit - ✔✔Fulfils same general function as a licence, except that they are usually
required as prerequisites to performing special functions incidental to the operation of
the business.
✔✔Risk Management - ✔✔Risk management is the systematic approach to minimizing
loss.
✔✔Loss Exposure - ✔✔is the chance of a financial loss to an organization as a result of
a particular peril striking a thing of value.
✔✔Tangible Property - ✔✔property that is real, can be touched, and has form and
substance.
✔✔Going Concern Value - ✔✔the difference in the value of property which must be sold
after a loss and its value had the business continued.
✔✔Intangible Property - ✔✔property that has no physical substance and consists of
legal rights rather than things.
✔✔Expediting Costs - ✔✔the extra costs incurred in hastening the recovery of a
business after a loss.
✔✔Risk Control - ✔✔refers to the steps taken to reduce the frequency and severity of
losses as much as possible with the resources that are available.
✔✔Risk Financing - ✔✔is concerned with paying those losses that inevitably occur.
✔✔Segregation - ✔✔involves arranging an organization's activities and resources so
that no single event can cause simultaneous losses to all of them.
, ✔✔Separation - ✔✔involves dividing an organization's single asset or operation into two
or more separate units.
✔✔Duplication - ✔✔involves complete reproduction of an organization's own "standby"
asset or facility to be kept in reserve.
✔✔Retention - ✔✔includes all means of generating funds from within the business to
pay for losses.
✔✔Contractual Transfer - ✔✔includes all means of generating funds from outside the
business to pay for losses.
✔✔Criminal Law - ✔✔The primary focus of criminal law is on punishing the person(s)
responsible for the crime.
Criminal law deals with wrongs against society and it is focused on punishing those that
commit criminal wrongs
✔✔Two main bodies of law relating to both criminal and civil matter: - ✔✔Common Law
and Statute Law
✔✔Common Law - ✔✔In Common Law, the basic concept is that current court
decisions must follow those made in cases having similar circumstances. This custom
of standing by previous decisions is known as the Rule of Precedent.
✔✔Remedies for Breach of Contract - ✔✔When there is a breach or failure to fulfill
contractual obligations, the courts may rule in the following manner:
- provide for payment of damages to the injured party
- enforce specific performance of the terms of the contract
- grant an injunction prohibiting a party to the contract from performing certain acts, or
ensuring a party to the contract performs certain acts
- permit rescission of the contract so as to return the parties substantially to their pre-
contract positions.
✔✔Liability in Common Law - ✔✔1) the defendant owned the plaintiff a legal duty of
care
2) the duty was breached as a result of the defendant's negligence
3) the plaintiff suffered damages as a proximate result of the defendant's negligence
✔✔The Broker and the Law - ✔✔Clients should be referred to a qualified legal
practitioner
✔✔Premises and Operations Liability Exposure - ✔✔The status of "occupier" is not
dependent on ownership of the premises, but rather is based on who has control over
the premises.
ANSWERS GRADED A+
✔✔Constructive Total Loss - ✔✔occurs when the cost of salvaging the cargo is too high
relative to the value saved.
✔✔Particular Average - ✔✔involves a partial loss to a specific shipment, other than a
General Average.
✔✔General Average - ✔✔deals with payment for marine losses voluntarily incurred for
the safety of the entire venture. The parties whose property was saved shall contribute
to the losses of the parties whose property was sacrificed.
✔✔Surety - ✔✔state of being sure, certain and secure.
✔✔Suretyship - ✔✔the guarantee of performance made by one person or entity for
another.
✔✔Surety Bond - ✔✔an undertaking by one party (the surety) to become accountable
to another party (the obligee) for the performance of an obligation or undertaking by a
third party (the principal). It is a promise to provide credit, if and when needed, to ensure
the faithful performance of an obligation.
✔✔Obligee - ✔✔the party to whom someone else is obligated under a contract.
or
the party to whom the bond is given.
✔✔Principal - ✔✔the person primarily liable.
✔✔Penalty - ✔✔the amount of credit given to the principal by the surety;
or
the amount which the surety is prepared to pay in the event the principal should default.
✔✔Statutory Bond - ✔✔one that is required by a municipal ordinance, or federal or
provincial regulation or statute.
✔✔Non-Statutory Bond - ✔✔not required by law but flows from the contract or
agreement between the parties.
✔✔Contract Bond - ✔✔guarantees the fulfillment of certain obligations required under
public and private contracts.
,✔✔Consent of Surety - ✔✔a letter assuring the owner that if the principal is the
successful bidder, the surety will issue such other bonds as are specified to ensure the
performance of the contract.
✔✔Working Capital - ✔✔the amount of funds available to pay continuing business
operating expenses until payment is received for work being undertaken by the
contractor.
✔✔Net Worth - ✔✔the amount of money remaining after all assets have been liquidated
and all liabilities cleared.
✔✔Licence - ✔✔issued by a regulatory body such as government in order to set rules
and regulations to safeguard the public.
✔✔Permit - ✔✔Fulfils same general function as a licence, except that they are usually
required as prerequisites to performing special functions incidental to the operation of
the business.
✔✔Risk Management - ✔✔Risk management is the systematic approach to minimizing
loss.
✔✔Loss Exposure - ✔✔is the chance of a financial loss to an organization as a result of
a particular peril striking a thing of value.
✔✔Tangible Property - ✔✔property that is real, can be touched, and has form and
substance.
✔✔Going Concern Value - ✔✔the difference in the value of property which must be sold
after a loss and its value had the business continued.
✔✔Intangible Property - ✔✔property that has no physical substance and consists of
legal rights rather than things.
✔✔Expediting Costs - ✔✔the extra costs incurred in hastening the recovery of a
business after a loss.
✔✔Risk Control - ✔✔refers to the steps taken to reduce the frequency and severity of
losses as much as possible with the resources that are available.
✔✔Risk Financing - ✔✔is concerned with paying those losses that inevitably occur.
✔✔Segregation - ✔✔involves arranging an organization's activities and resources so
that no single event can cause simultaneous losses to all of them.
, ✔✔Separation - ✔✔involves dividing an organization's single asset or operation into two
or more separate units.
✔✔Duplication - ✔✔involves complete reproduction of an organization's own "standby"
asset or facility to be kept in reserve.
✔✔Retention - ✔✔includes all means of generating funds from within the business to
pay for losses.
✔✔Contractual Transfer - ✔✔includes all means of generating funds from outside the
business to pay for losses.
✔✔Criminal Law - ✔✔The primary focus of criminal law is on punishing the person(s)
responsible for the crime.
Criminal law deals with wrongs against society and it is focused on punishing those that
commit criminal wrongs
✔✔Two main bodies of law relating to both criminal and civil matter: - ✔✔Common Law
and Statute Law
✔✔Common Law - ✔✔In Common Law, the basic concept is that current court
decisions must follow those made in cases having similar circumstances. This custom
of standing by previous decisions is known as the Rule of Precedent.
✔✔Remedies for Breach of Contract - ✔✔When there is a breach or failure to fulfill
contractual obligations, the courts may rule in the following manner:
- provide for payment of damages to the injured party
- enforce specific performance of the terms of the contract
- grant an injunction prohibiting a party to the contract from performing certain acts, or
ensuring a party to the contract performs certain acts
- permit rescission of the contract so as to return the parties substantially to their pre-
contract positions.
✔✔Liability in Common Law - ✔✔1) the defendant owned the plaintiff a legal duty of
care
2) the duty was breached as a result of the defendant's negligence
3) the plaintiff suffered damages as a proximate result of the defendant's negligence
✔✔The Broker and the Law - ✔✔Clients should be referred to a qualified legal
practitioner
✔✔Premises and Operations Liability Exposure - ✔✔The status of "occupier" is not
dependent on ownership of the premises, but rather is based on who has control over
the premises.
