Chapter 3 Flashcards
What are the essentials of a valid contract?
Offer+acceptance + Consideration
A contract may be declared invalid or set aside if it is missing any of these essentials
What is unconditional or qualified acceptance?
This is where the offer is not challenged and there is no problem with it
What is conditional/qualified acceptance or a counter offer?
Where the client would put a condition in place to accept it.
(Rejection of an offer)
What is postal acceptance?
This is where the acceptance is on the day that the letter if officially sent
What is meant by consideration?
This is where one party is giving something so one party receives something . A promise or payment is enough for acceptance in this case
What is the purpose of a contract?
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
When does the FCA require renewals to be sent out?
In good time
Why are renewal letters required?
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
Who can cancel a policy?
Both the insurer and the insured
Insurers reasons to cancel a policy?
- Client not followed the policy term rules
- Voidable contracts
- Breach of warranty
- Fraudulent acts
Insureds reasons to cancel a policy?
- Policy terms not suitable
- Unable to pay
- No longer need the policy
- Found a cheaper alternative
What are the insurers rights when cancelling a policy?
- Most policies have a cancellation condition
- It allows the insurer to cancel, provided that a letter is sent to the insureds last known address
What are the insureds rights when cancelling a policy?
- A consumer has a right to cancel without penalty or giving reason
Ab initio
‘From the start’
Estoppel
When an insurer has been stopped/prevented from asserting a face or right, meaning that they cant cancel a policy
Voidable contract
- 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
What is a breach of warranty
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)
Can a breach of warranty terminate a contract?
No under the IA 2012, a BOW will no longer automatically terminate a contract
Policy suspension
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
Meaning of an agent
An agent is one who is authorised by a principal to bring that principal into a contractual relationship with another, a third party
Agency by consent
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
Agency by necessity
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
Agency by ratification
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
What are the duties of an agent?
- Obedience
- Personal performance
- Due care and skill
- Good faith
- Accountability
What are the duties of a principal?
- Remuneration
- Indemnity
Express authority
Arises from the terms of an agency agreement, which may be oral or in writing
