Chapter 3

Question 1

Offer and acceptance

Answer 1

a contract comes into existence when one party makes an offer which the other accepts
unconditionally

Question 2

Consideration

Answer 2

contracts must be supported by consideration to be valid Defined in currie v. misa

Question 3

Fulfilment

Answer 3

An insurance would mean a total loss of the subject matter

Question 4

Agency

Answer 4

is one who is authorised by a principal to bring that principal into a contractual relationship with another third party the most usual way creating a relationship between principal and agent is by consent also known as an agency agreement. Insurers will issues a term of business agreement to each agent starting the terms and conditions of the appointed

Question 5

Agency by necessity

Answer 5

arises where a person is entrusted with someone else good and it becomes necessity to
acct in a certain way in way order to preserve the property in an emergency

Question 6

Ratifications

Answer 6

Refers to a situation where an agent act without authority, but the principal accepts the act as
having been done by the agency on their behal

Question 7

Agency by consent

Answer 7

The most usual way of creating a relationship between principal and agent is by consent and
also known as an agency by agreement

Question 8

Accountability

Answer 8

an agent must account to their principal for all money they receive on their behalf and must
keep a proper record of all transactions

Question 9

Actual authority

Answer 9

may be express or implied

Question 10

Express authority

Answer 10

arises from the terms of an agency agreement, which may be oral or in writing

Question 11

Implied authority

Answer 11

may be of two kinds. If the agent has to undertake a certain action in order to carry out
express instructions

Question 12

An agent

Answer 12

may be terminated by mutual consent, by either party or by the death, bankruptcy or insanity of
either party

Question 13

Terms of business agreement (TOBA’S

Answer 13

should be clear and succinct, reflect the business relationship, define and
allocate responsibilities and rights, ensure compliance with regulatory or statutory rules

Question 14

Good faith

Answer 14

relationship with their principal is one of trust. It follows that they must not allow their own
interest to conflict with their duties towards their principa

Question 15

Under the insurance act 2015

Answer 15

an insurer may elect to contract in response to a fraudulent act

Question 16

A consumer

Answer 16

Has a right to cancel without a penalty and without a reason, most insurance policies purchased at the distance as long as they do so within 30 days for a payment protection policy or 14 days for any other type of policy

Question 17

What can an insurer do in the event of a fraudulent claim?

Answer 17

1. Not liable for the claim
2. Recover any amounts already paid for the claim
3. Can choose to cancel the contract from the date of the fraudulent act with no return of premium

Question 18

What happens in a breach of warranty?

Answer 18

The insurer is discharged from liability from the date of the breach until it is remedied

Question 19

What is a warranty?

Answer 19

A term in an insurance contract which must be complied with by the insured

Question 20

What does “ab initio” refer to?

Answer 20

Avoiding the contract entirely and setting it aside “from the beginning” usually due to mis-representation or non-disclosure

Question 21

What are the insurer’s rights of cancellation?

Answer 21

Depends on the policy. Most have a cancellation condition allowing the insurer to cancel providing they send a letter to the insured’s last known address providing 14 days of notice of cancellation. The period of notice is set by the insurer. They then owe a pro rata return premium representing the risk not covered

Question 22

What is the legal definition of consideration?

Answer 22

Some right, interest, profit or benefit accruing to one party, or some forebearance, detriment, loss or responsibility given, suffered, or undertaken by the other

Question 23

What are the rules about postal acceptance?

Bonus points for naming the precedent case

Answer 23

If the parties have agreed to communicate by post the acceptance is complete at the point when the letter is posted, even if it is delayed, lost, and never received by the other party

Household Fire Insurance Co v Grant (1879

Question 24

Does an offer and conditional acceptance form a contract?

Bonus points for naming the precedent case

Answer 24

Not unless accepted by the initial proposer - the conditional acceptance becomes a new offer (a counter offer) and rejects the original offer

Hyde v Wrench (1840

Question 25

What are the two types of acceptance?

Answer 25

Unconditional and conditional

Question 26

An agreement must satisfy what 2 criteria to be considered a valid and enforceable contract?

(There are others but they are not included in the syllabus

Answer 26

Offer & Acceptance

Consideration

Question 27

What is apparent

Answer 27

It is unlikely that a third party will be aware of the extent of an agent agreement.

Question 28

Duties of a principal

Answer 28

Remuneration

Indemnity

Question 29

Marine Insurance act 1906

Answer 29

A warranty is a term is a insurance contract which is according to the marine insurance act must be exactly and literally complied with by the insured whether material to the risk or not

Question 30

What are the duties of an agent

Answer 30

Obedience 
Personal performance 
Due care ans skill 
Good faith 
Accountability