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Chapter 3 Contract and agency 3/13

Question answers

3.1 Ellen is not contractually bound to pay the reward to Jayne as Jayne did not receive the offer and, therefore,
no contract was formed.
3.2 Consideration can take many forms. Other examples would include the delivery of goods by X to Y in return
for use of Y’s warehouse for X’s goods; or working on a farm in return for accommodation (in other words,
any promise or act done in exchange for another promise or act).
3.3 The legal definition of an agent is one who is authorised by one party (the principal) to bring that party into a
contractual relationship with another (the third party). Chapter
Everyone who acts on behalf of another person is an agent, in law.

3.4 The insurers would have to indemnify the customer, as the customer was unaware that the agent had no 3
authority to bind the insurers when the contract was made. As far as the insured was concerned, the agent
had apparent authority to bind insurers.

Sample examination question answers
1. The correct answer is D.
Remember that there needs to be some form of consideration for a contract to be valid – this could be payment
or a promise to perform an action.
2. The correct answer is C.
The other tasks carried out by the intermediary in this scenario would be considered as the intermediary being
the agent of the client. Reference copy for CII Face to Face Training