Arizona Adjuster Practice Exam

A release is a legally binding agreement that requires which of the following to be valid?

1. Written documentation only

2. Competent parties and exchange of consideration

3. Signatures of both parties only

4. Witnesses present during the signing

The correct answer is: Competent parties and exchange of consideration

A release is a legally binding agreement that requires the presence of competent parties and an exchange of consideration to be valid. Competent parties refer to individuals or entities that have the legal capacity to enter into a contract, meaning they are of legal age and sound mind. The exchange of consideration involves something of value being given in return for the agreement, which can be money, services, or a promise to do (or refrain from doing) something. Both elements are essential for a release to hold up in court; without them, the release may be deemed unenforceable. While written documentation can help clarify the terms and prevent disputes, it is not solely sufficient for validity. Similarly, signatures and witnesses may provide additional support but do not replace the foundational requirements of competent parties and consideration.