2. CHAPTER 3 CONTRACT AND AGENCY
Exam Style Questions
9% OF THE EXAM

3. What are essential elements of all valid contracts of insurance?
agreement, consideration and commission
invitation to treat, offer and acceptance.
offer, acceptance and consideration.
D. Offer, acceptance and reinsurance

4. In which of these situations is there an absence of consideration?
A coffee shop has promised a free cup of coffee to any customer who buys 10 cups of coffee from them.
Brenda has won a lot of money in a lottery and has agreed to pay 10% of her winnings to a local charity
Chas has agreed to wash Simon’s windows in exchange for some financial advice
Tony agrees to redecorate a function room for a hotet who are providing him with full board accommodation in exchange for this work

5. An insurance company offers Joe travel insurance for a premium of £200 subject to an excess of £100. Joe agrees to this provided the insurers reduce the premium by 5%. What has Joe just done?
Entered into a legally binding agreement
Made a counter offer
Ratified the offer
Rendered the contract voidable

6. Under the general law of agency, who does an agent act on behalf of?
Both the principal and the third party
The person paying the highest fee
The principal
The third party

7. An agent, acting within the terms of the agency agreement, enters his principal into a binding contract with a client. What is the correct legal position?
The contract still needs to be ratified by the principal
The principal or third party can declare the contract void at any time
The principal and third party are bound by the contract
The contract still needs to be ratified by the third party

8. Adrian is a registered insurance broker working for a large broking company. When he advises Tony on the best insurance for his new car, who is he acting for?
Motor Insurers Bureau
The car dealer
The Insurer
Tony

9. Agents must not allow their own interests to conflict with their duties towards their principal. Which duty of an agent does this most relate to?
Accountability
Due care and skill
Good faith
Personal performance

10. Under the law of agency, what is an 'undisclosed principal'?
Someone for whom an agent acts whilst seeming to act on their own behalf.
Someone who has given authority to an agent under the promissory estoppel principle
Someone who has not given express authority to an agent to act on their behalf.
Someone who ratifies the acts of an agent who has acted outside their authority.

11. Who has provided guidance on the contents of insurance TOBA’s?
Association of British Insurers
Chartered Insurance Institute
Financial Ombudsman Service
Prudential Regulation Authority

12. When insurance policies are due for renewal, what is an insurer required to do to comply with Financial Conduct Authority regulations?
Invite renewal of all policies in good time before the renewal date.
Invite renewal of all policies at least 21 days in advance of the renewal date.
Provide appropriate information to policyholders at least 21 days in advance of the renewal date.
Provide appropriate information to policyholders in good time before the renewal date.