South Carolina Funeral Law Practice Exam

If the preneed contract is voidable, what happens to the funds paid?

1. Saved in a trust

2. Returned fully to the purchaser

3. Kept by the provider

4. Invested for future use

The correct answer is: Returned fully to the purchaser

When a preneed contract is deemed voidable, it means that the purchaser has the right to rescind or cancel the contract, typically due to a breach of duty or failure to comply with certain legal requirements. In this circumstance, the funds that have been paid under the contract are returned fully to the purchaser. This outcome is grounded in the principle of protecting the consumer, ensuring they receive a full refund rather than losing their money due to issues surrounding the contract's validity. The refund serves to rectify any potential disadvantages faced by the purchaser, promoting fairness and accountability within the funeral industry. The other options do not align with the purpose of voidable contracts, which is centered around consumer protection. Keeping the funds in a trust, maintaining them with the provider, or investing them do not reflect the contractual obligation to return money to the consumer when a contract is voidable. Instead, the clear intention is to return all funds to the consumer, thereby rectifying any situation where the contract is no longer valid.