Registered Insurance Brokers of Ontario (RIBO) Practice Exam

True or False: The absence of mutual understanding affects the legality of a signed contract.

1. True

2. False

3. It depends on the circumstances

4. Only if disputed in court

The correct answer is: False

The correct answer is that the absence of mutual understanding does not affect the legality of a signed contract. In contract law, a legally binding contract requires certain elements, including mutual consent, consideration, and the capacity of parties. However, once a contract is signed, the presumption is that both parties have understood and agreed to the terms, regardless of whether there was complete mutual understanding. In cases where there is ambiguity or misunderstanding, the contract might still be enforceable, unless one party can clearly prove that they were misled or that the agreement lacked essential elements of a contract. Therefore, the legality remains intact even if one party claims that there wasn't full mutual understanding at the time of signing. Other options might imply varying levels of conditions or situations that affect legality, but the core principle is that a signed contract is generally considered valid unless proven otherwise in a significant legal dispute.