Chapter 3 - Contract and Agency Flashcards
Essentials of a valid contract
Offer and acceptance – for contract to be effective, acceptance must be the final agreement. If sent by post acceptance is complete when the letter of acceptance is posted (est. Household Fire Insurance Co. v. Grant (1879)).
Consideration – some right, profit or benefit accruing one party, or some loss or responsibility given, suffered, or undertaken by the other (defined in Currie v. Misa (1875)).
Renewal of insurance contracts
No obligation to offer renewal terms.
Should be offered in good time.
2017 FCA introduces regulatory rules for insurers and intermediaries to:
• Disclose previous years premium on renewal notices
• Encourage consumers to check their cover and find the best deal
• Identify consumers who have renewed 4 consecutive times, and give them an additional prescribed notice
Cancellation of insurance contracts
Insurers right – a cancellation condition allows insurer to cancel if a letter is sent to the insured giving notice and pro rata return premium.
Policyholder’s right – cancel without given reason or penalty for most purchases at a distance and they are only required to pay for the service provided. Face to face may not have cancellation right but will have a cancellation fee.
Other means of terminating contracts
Fulfilment – would happen if there is a total loss of the subject matter.
Voidable contracts – may happen if insured is in breach of a policy condition that place a continuing requirement on them, or as consequence of non-disclosure or misrepresentation of information.
Breach of warranty – use to be automatic termination of contract before Insurance Act (2015) now, insurer has no liability during the period of suspension.
Fraudulent acts – can terminate contract effect from time of fraudulent act without a return of premium.
Agent/principal relationships
Agency by consent – parties enter into a terms of business agreement (TOBA) by means of express appointment. Can also be implied so work is undertaken, and commission paid but nothing is written down.
Agency by necessity – arises where a person is entrusted with someone else’s property and becomes necessary to act in order to preserve it in an emergency.
Agency by ratification – an agent acts without authority but the principal accepts as if done on their behalf.
Termination of agency
Most common ways are:
• Mutual agreement by principal and agent
• Agency withdrawn by principal
• Principal given up by agent
• Death, bankruptcy, or insanity of either party
Is important the principal notifies all relevant parties
Terms of business agreements (TOBA)
All TOBAs should be clear and succinct, reflect the business relationship, define and allocate responsibilities and rights, ensure compliance with regulatory or statutory rules.
‘English Law’ definition of a contract
Agreement, enforceable by law, between two or more persons to do, or abstain from doing acts, their intention being to create legal relations
