AIC 301 Exam Questions With Complete Solutions
/. .What are the elements of a legally binding contract? - Answer-✅To be legally
binding, contracts must:
• Contain an agreement between all parties
• Involve parties with the legal capacity to contract
• Contain mutual assent
• Involve consideration
• Have a legal purpose
• Be in the form prescribed by law
/.What are the similarities and differences between bilateral and unilateral contracts? -
Answer-✅In bilateral contracts, each party promises to perform an act in exchange for
the act of the other party. In a unilateral contract, one party promises to pay for an act of
the other party. If the act isn't performed, no payment is required
/.What are the similarities and differences between voidable and void contracts? -
Answer-✅A voidable contract is a valid contract that can continue in force, and the
parties can execute it completely unless an innocent or injured party chooses to avoid it.
The behavior of one of the contracting parties, such as an act of fraud or illegal deceit,
can also make a contract voidable. A void contract is an agreement that never met the
necessary criteria to be considered a contract
/.What are the two remedies available to the plaintiff if fraud is proved in a given case? -
Answer-✅If fraud is proved, the plaintiff can seek one of two remedies: •
Rescission—If the court rescinds the contract, the plaintiff has no further duties under it
and is entitled to reimbursement of all payments made to the defendant. The plaintiff
also must return anything of value received under the contract. The court's goal is to
restore the parties to the condition they were in before they entered the contract.
• Sue for damages—If rescission wouldn't make the plaintiff whole, the plaintiff can sue
for damages in a tort action. The plaintiff can seek compensatory damages for
quantifiable harm and punitive damages to further punish the defendant and deter
future, similar fraudulent actions. The plaintiff must prove the extent of the loss to
receive damages.
/.What are two things the insurer must prove to establish that fraudulent concealment
occurred? - Answer-✅To establish that fraudulent concealment occurred, the insurer
must prove two things:
• The insured knew that the fact concealed was material.
,• The insured concealed the fact with the intent to defraud.
/.What is the difference between unilateral and bilateral mistakes in a contract? -
Answer-✅A unilateral mistake is made by one party to a contract. Bilateral mistakes
occur when both parties to a contract make the same mistake involving a material fact.
/.On what grounds can a person who has reasonably relied on an innocently
misrepresented material fact later avoid a contract? - Answer-✅A person who relies on
a misrepresented material fact can later avoid a resulting contract because he or she
didn't achieve mutual assent
/.What is the purpose of the parol evidence rule? - Answer-✅The parol evidence rule
serves three purposes:
• Carry out the parties' presumed intention.
• Achieve certainty and finality as to the parties' rights and duties
. • Exclude fraudulent and perjured claims
/.How do courts resolve doubts and ambiguities in the language of a contract? -
Answer-✅Courts use well-accepted interpretation guidelines to resolve doubts and
ambiguities in an existing contract. These guidelines are not strict legal rules, and they
aren't designed to create a new contract or rewrite an old one
/.. What's the difference between entire and divisible contracts? - Answer-✅Contracts
can be characterized as entire or divisible. In an entire contract, one party must fulfill all
terms of the contract to be entitled to the other party's specified act. In a divisible
contract, one party is entitled to payment for each portion of the contract completed
/.How do courts prioritize the types of changes that can be made to printed contract
forms? - Answer-✅Courts prioritize any changes to printed contract forms in this order:
• Handwriting prevails over printing.
• Words prevail over numbers
/.Why might contract rights be unassignable? - Answer-✅Contract rights are
unassignable if:
• Laws restrict prior assignment of such rights as veterans disability benefits,
government pensions, wages, inheritances, and workers compensation benefits.
• The parties to an agreement specify that they cannot, under the contract, assign the
rights.
• They are personal rights.
• An assignment materially alters or varies the obligor's performance.
• A judgment is pending in a personal injury case.
/.Charlotte is an assignee in a contractual assignment. She contends that her rights
should extend beyond Marvin's, the assignor, because she bears the brunt of the
contractual burden. What can Charlotte learn about the validity of her argument? -
, Answer-✅As a general rule, the assignee's rights are those of the assignor and do not
extend beyond them. So Charlotte will learn that her argument likely cannot be enforced
/.Why is the legal distinction between creditor and donee beneficiary contracts
becoming less important? - Answer-✅These two types of beneficiaries are often being
treated as one class, intended beneficiaries, who are third-party beneficiaries to whom a
benefit was intended by the contracting parties
/.. What are the elements required for a novation? - Answer-✅For a novation to be
effective, all parties must agree to the substitution or addition of an obligation and to
how the parties will be affected
/.What are some of the circumstances that may make performance of a contract
impossible? - Answer-✅These are four circumstances that may make performance of a
contract impossible:
• If a change in law or a governmental act makes fulfilling an existing contract illegal, the
promisor's obligation is excused.
• If a specific person must perform a personal service and that person dies or becomes
incapacitated, the contractual obligation to perform the service is discharged. This is
generally nonapplicable with contracts involving the production and sale of goods
• If the subject matter of the contract is destroyed or becomes nonexistent after the
contract is formed and the promisor isn't at fault, the obligation is discharged.
• If an act by one party prevents the other party from performing a contractual obligation,
a court will excuse the obligation.
/.What circumstances affect the materiality of a breach of contract? - Answer-✅The
circumstances that affect the materiality of a breach of contract include the extent to
which the breaching party has performed, the willfulness of the breach, and the extent
to which the nonbreaching party has obtained benefits and can receive adequate
compensation. One party's material breach excuses the other party's performance and
immediately gives rise to remedies for breach of contract
/.What are the primary remedies for a breach of contract? - Answer-✅If a contract is
breached, the injured party can seek a legal remedy by suing to collect money
damages. An injured party in a breach of contract for the sale of goods can sue either
for money damages or for the price of the goods. Alternatively, the injured party can ask
the court for one of two equitable remedies to correct the situation: specific performance
of the contract or injunction.
/.Under what circumstances would courts order the equitable remedy of specific
performance? - Answer-✅Courts order the equitable remedy of specific performance
when money damages would be inappropriate or inadequate. To determine whether
/. .What are the elements of a legally binding contract? - Answer-✅To be legally
binding, contracts must:
• Contain an agreement between all parties
• Involve parties with the legal capacity to contract
• Contain mutual assent
• Involve consideration
• Have a legal purpose
• Be in the form prescribed by law
/.What are the similarities and differences between bilateral and unilateral contracts? -
Answer-✅In bilateral contracts, each party promises to perform an act in exchange for
the act of the other party. In a unilateral contract, one party promises to pay for an act of
the other party. If the act isn't performed, no payment is required
/.What are the similarities and differences between voidable and void contracts? -
Answer-✅A voidable contract is a valid contract that can continue in force, and the
parties can execute it completely unless an innocent or injured party chooses to avoid it.
The behavior of one of the contracting parties, such as an act of fraud or illegal deceit,
can also make a contract voidable. A void contract is an agreement that never met the
necessary criteria to be considered a contract
/.What are the two remedies available to the plaintiff if fraud is proved in a given case? -
Answer-✅If fraud is proved, the plaintiff can seek one of two remedies: •
Rescission—If the court rescinds the contract, the plaintiff has no further duties under it
and is entitled to reimbursement of all payments made to the defendant. The plaintiff
also must return anything of value received under the contract. The court's goal is to
restore the parties to the condition they were in before they entered the contract.
• Sue for damages—If rescission wouldn't make the plaintiff whole, the plaintiff can sue
for damages in a tort action. The plaintiff can seek compensatory damages for
quantifiable harm and punitive damages to further punish the defendant and deter
future, similar fraudulent actions. The plaintiff must prove the extent of the loss to
receive damages.
/.What are two things the insurer must prove to establish that fraudulent concealment
occurred? - Answer-✅To establish that fraudulent concealment occurred, the insurer
must prove two things:
• The insured knew that the fact concealed was material.
,• The insured concealed the fact with the intent to defraud.
/.What is the difference between unilateral and bilateral mistakes in a contract? -
Answer-✅A unilateral mistake is made by one party to a contract. Bilateral mistakes
occur when both parties to a contract make the same mistake involving a material fact.
/.On what grounds can a person who has reasonably relied on an innocently
misrepresented material fact later avoid a contract? - Answer-✅A person who relies on
a misrepresented material fact can later avoid a resulting contract because he or she
didn't achieve mutual assent
/.What is the purpose of the parol evidence rule? - Answer-✅The parol evidence rule
serves three purposes:
• Carry out the parties' presumed intention.
• Achieve certainty and finality as to the parties' rights and duties
. • Exclude fraudulent and perjured claims
/.How do courts resolve doubts and ambiguities in the language of a contract? -
Answer-✅Courts use well-accepted interpretation guidelines to resolve doubts and
ambiguities in an existing contract. These guidelines are not strict legal rules, and they
aren't designed to create a new contract or rewrite an old one
/.. What's the difference between entire and divisible contracts? - Answer-✅Contracts
can be characterized as entire or divisible. In an entire contract, one party must fulfill all
terms of the contract to be entitled to the other party's specified act. In a divisible
contract, one party is entitled to payment for each portion of the contract completed
/.How do courts prioritize the types of changes that can be made to printed contract
forms? - Answer-✅Courts prioritize any changes to printed contract forms in this order:
• Handwriting prevails over printing.
• Words prevail over numbers
/.Why might contract rights be unassignable? - Answer-✅Contract rights are
unassignable if:
• Laws restrict prior assignment of such rights as veterans disability benefits,
government pensions, wages, inheritances, and workers compensation benefits.
• The parties to an agreement specify that they cannot, under the contract, assign the
rights.
• They are personal rights.
• An assignment materially alters or varies the obligor's performance.
• A judgment is pending in a personal injury case.
/.Charlotte is an assignee in a contractual assignment. She contends that her rights
should extend beyond Marvin's, the assignor, because she bears the brunt of the
contractual burden. What can Charlotte learn about the validity of her argument? -
, Answer-✅As a general rule, the assignee's rights are those of the assignor and do not
extend beyond them. So Charlotte will learn that her argument likely cannot be enforced
/.Why is the legal distinction between creditor and donee beneficiary contracts
becoming less important? - Answer-✅These two types of beneficiaries are often being
treated as one class, intended beneficiaries, who are third-party beneficiaries to whom a
benefit was intended by the contracting parties
/.. What are the elements required for a novation? - Answer-✅For a novation to be
effective, all parties must agree to the substitution or addition of an obligation and to
how the parties will be affected
/.What are some of the circumstances that may make performance of a contract
impossible? - Answer-✅These are four circumstances that may make performance of a
contract impossible:
• If a change in law or a governmental act makes fulfilling an existing contract illegal, the
promisor's obligation is excused.
• If a specific person must perform a personal service and that person dies or becomes
incapacitated, the contractual obligation to perform the service is discharged. This is
generally nonapplicable with contracts involving the production and sale of goods
• If the subject matter of the contract is destroyed or becomes nonexistent after the
contract is formed and the promisor isn't at fault, the obligation is discharged.
• If an act by one party prevents the other party from performing a contractual obligation,
a court will excuse the obligation.
/.What circumstances affect the materiality of a breach of contract? - Answer-✅The
circumstances that affect the materiality of a breach of contract include the extent to
which the breaching party has performed, the willfulness of the breach, and the extent
to which the nonbreaching party has obtained benefits and can receive adequate
compensation. One party's material breach excuses the other party's performance and
immediately gives rise to remedies for breach of contract
/.What are the primary remedies for a breach of contract? - Answer-✅If a contract is
breached, the injured party can seek a legal remedy by suing to collect money
damages. An injured party in a breach of contract for the sale of goods can sue either
for money damages or for the price of the goods. Alternatively, the injured party can ask
the court for one of two equitable remedies to correct the situation: specific performance
of the contract or injunction.
/.Under what circumstances would courts order the equitable remedy of specific
performance? - Answer-✅Courts order the equitable remedy of specific performance
when money damages would be inappropriate or inadequate. To determine whether
