Property and Casualty Insurance Practice Exam

Which of the following is NOT a characteristic of a valid contract?

1. Competent parties

2. Legal purpose

3. Mutual benefit

4. Offer and agreement

The correct answer is: Mutual benefit

The correct answer to the question regarding the characteristics of a valid contract is mutual benefit. In the context of contract law, a valid contract must consist of several key elements: competent parties, legal purpose, and mutual agreement (offer and acceptance). Competent parties refers to the necessity of all parties being of legal age and mentally capable of entering into a contract. Legal purpose means that the contract’s content must be lawful and not against public policy. Offer and acceptance indicate that there must be a clear proposal by one party and an agreement by the other, showing mutual consent to the terms. While mutual benefit may be desirable in many contracts, it is not a structural requirement for the validity of a contract. Contracts can exist even if one party does not gain a benefit, as long as the other elements are fulfilled. Thus, mutual benefit is not necessary to establish a valid contract.