Chapter 3

Question 1

What are the essentials of a valid contract?

Answer 1

Offer+acceptance + Consideration

A contract may be declared invalid or set aside if it is missing any of these essentials

Question 2

What is unconditional or qualified acceptance?

Answer 2

This is where the offer is not challenged and there is no problem with it

Question 3

What is conditional/qualified acceptance or a counter offer?

Answer 3

Where the client would put a condition in place to accept it.
(Rejection of an offer)

Question 4

What is postal acceptance?

Answer 4

This is where the acceptance is on the day that the letter if officially sent

Question 5

What is meant by consideration?

Answer 5

This is where one party is giving something so one party receives something . A promise or payment is enough for acceptance in this case

Question 6

What is the purpose of a contract?

Answer 6

The purpose of a ‘policy wording’ is so there is evidence of a contract in place. It ‘covers the insurers back’ and so then the policy holder knows what they’re entitled to

Question 7

When does the FCA require renewals to be sent out?

Answer 7

In good time

Question 8

Why are renewal letters required?

Answer 8

Renewal letters are required because:

• A client is given the opportunity to find insurance elsewhere
• To disclose last years premium
• For consumers who have renewed four consecutive times, give encouragement to shop around

Question 9

Who can cancel a policy?

Answer 9

Both the insurer and the insured

Question 10

Insurers reasons to cancel a policy?

Answer 10

• Client not followed the policy term rules
• Voidable contracts
• Breach of warranty
• Fraudulent acts

Question 11

Insureds reasons to cancel a policy?

Answer 11

• Policy terms not suitable
• Unable to pay
• No longer need the policy
• Found a cheaper alternative

Question 12

What are the insurers rights when cancelling a policy?

Answer 12

• Most policies have a cancellation condition

- It allows the insurer to cancel, provided that a letter is sent to the insureds last known address

Question 13

What are the insureds rights when cancelling a policy?

Answer 13

• A consumer has a right to cancel without penalty or giving reason

Question 14

Ab initio

Answer 14

‘From the start’

Question 15

Estoppel

Answer 15

When an insurer has been stopped/prevented from asserting a face or right, meaning that they cant cancel a policy

Question 16

Voidable contract

Answer 16

• There are circumstances in which one party may set it aside (set to be voidable at their option)
• This may arise under policies where the insured is in breach of policy conditions
• An insurer may be able to void the contract entirely, setting it asise ‘Ab initio’ as consequence of non disclosure or misrepresentation

Question 17

What is a breach of warranty

Answer 17

Breach - A deliberate or reckless/non deliberate careless act

Warranty - A rule/term, of the policy that you have to abide by (specific to the policy)

Question 18

Can a breach of warranty terminate a contract?

Answer 18

No under the IA 2012, a BOW will no longer automatically terminate a contract

Question 19

Policy suspension

Answer 19

Meaning the policy still stands but no cover is in place until the policy holder fully complies with the policy.

Etc. new locks on a door

Question 20

Meaning of an agent

Answer 20

An agent is one who is authorised by a principal to bring that principal into a contractual relationship with another, a third party

Question 21

Agency by consent

Answer 21

Both parties enter into a legally enforceable agreement done by express appointment where the terms of the appointment are written down.

Insurers would then issue a TOBA to each agent, the extent of the agents authority and how money is to be handled.

Most common method used in insurance

Question 22

Agency by necessity

Answer 22

This arises where a person is entitled with someone else’s goods and it becomes necessary to act a certain way in order to preserve the property in an emergency

Question 23

Agency by ratification

Answer 23

This refers to a situation where an agent acts without authority but the principal accepts the fact as having done by an agent on their behalf

The principal must ratify the whole contract and is not able to vary its terms or pick and choose which elements to accept

Question 24

What are the duties of an agent?

Answer 24

• Obedience
• Personal performance
• Due care and skill
• Good faith
• Accountability

Question 25

What are the duties of a principal?

Answer 25

• Remuneration

- Indemnity

Question 26

Express authority

Answer 26

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