Chapter 3 Flashcards
What are the essentials of a valid contract?
Offer and acceptance
Consideration - The price given in exchange for goods or services under a contract, or a promise to do (or not to do) something in return.
What are some other important elements of contracts?
Intention to create a legal agreement - The parties are acting deliberately.
Possibility of performance - Can what is agreed be done?
Capacity to enter legal relations - Over 18 and not those with diminished mental abilities.
Meeting of minds - Both parties think they are agreeing to the same thing.
Certainty - Are all parties clear on their obligations.
Duties of disclosure
Good Faith - All parties to a contract must act with good faith and this is also true with insurance contracts. The insured can cannot attempt to mislead the insurer.
Materiality - The concept of materiality is one which is not new and exists in the pre-existing law on disclosure and representations. Examples of material information include physical hazard and moral hazard, these must be disclosed to the insurer to make sure that risk is minimised, and the contract is in good faith.
Variation - a variation sports change to an insurance contract can occur at any point after the original placement is concluded.
Cancellation of insurance contracts
Most policies have a general cancellation condition. This allows the insurer to cancel the policy, provided notice is given to the insured giving a 14 day’s cancellation notice. This is not common, but it is possible. It can be found in policies with war coverage most often.
What is a proximate cause?
Often the cause of a loss is straightforward and there is no need for a long investigation. However, there are occasions when the cause of loss is not so easily defined. This is when insurers will apply the doctrine of proximate cause. The proximate cause of an occurrence is always the dominant cause and there is a clear link between that and the resulting loss. This could be imagined as the first domino to fall.
What is indemnity?
Financial compensation sufficient to place the insured in the same financial position after a loss as they enjoyed immediately before the loss occurred.
What is contribution?
The right of an insurer to call upon office similarly, but not necessarily equally, liable to the same insured to share the cost of an indemnity payment
What is subrogation?
The right of an insurer following the payment of a claim to take over the insureds right to recover payment from a third party following a loss.
