Canadian Accredited Insurance Broker (CAIB) One Practice Exam

What is a legally enforceable agreement between two or more parties called?

1. A contract

2. An agreement

3. A will

4. A contract of consideration

The correct answer is: A contract

A legally enforceable agreement between two or more parties is recognized as a contract. A contract represents a mutual understanding and commitment that is enforced by law. To qualify as a contract, the agreement typically includes essential elements such as an offer, acceptance, consideration, and the intention to create legal relations. This makes contracts a fundamental element in business and legal transactions, providing security and clarity for the parties involved. An agreement, while it may signify a mutual understanding, does not necessarily encompass the legal enforceability that characterizes a contract. A will, on the other hand, is a legal document that specifies how an individual's assets should be distributed upon their death, which is not applicable in the context of enforceable agreements between parties during their lifetime. Regarding a contract of consideration, although consideration is an essential part of a contract, the term itself does not encompass the entirety of what constitutes a legally enforceable agreement. Thus, the correct response is that a legally enforceable agreement is specifically a contract.