Alberta General Insurance Level 1 Practice Exam

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What constitutes a contract?

  1. A formal agreement requiring state approval

  2. A verbal agreement on future intentions

  3. An agreement between two or more parties intended to be legally enforceable

  4. A written document signed by a notary

The correct answer is: An agreement between two or more parties intended to be legally enforceable

A verbal agreement on future intentions is not considered a contract as there is no written or legally enforceable agreement. A formal agreement requiring state approval is not the only type of contract. Contracts can also be made through mutual agreement between two parties without state involvement. A written document signed by a notary may add an extra layer of formality, but it is not necessary for a contract to be legally enforceable. Contracts can be written or verbal, as long as there is an agreement between parties that is intended to be legally binding.

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