Chapter 3: Contract and Agency Flashcards
What are the two essentials of a contract?
- Offer and acceptance;
- Consideration.
What is a contract said to be if it lacks any of the essential components?
Void ab initio (from the beginning)
What is conditional acceptance.
When one party agrees to all terms except one, and they make a counter-offer. A contract does not exist at this point.
What did Hyde v. Wrench establish?
A counter-offer is a refusal of the original terms.
If postage is used, at what point is the contract said to have been accepted?
Once acceptance is posted.
Define consideration.
Some right or benefit accruing to one party, or some loss or detriment suffered by another party.
E.g. paying money is a detriment to the person paying, but a gain to the payee.
Why might an insurer cancel a policy?
Happens rarely but may be done if the insured has acted unreasonably or if the insured has acted fraudulently in relation to a claim.
When can a policy not be cancelled?
If it’s a travel policy or a policy less than one month long.
Why would a policy be terminated for lack of fulfilment.
If there is a total loss of subject matter. E.g. a car that is burnt out effectively ceases to exist.
What is a voidable insurance contract?
One in which a provision of the contract has not been followed. E.g. using a VPN under a cyber policy.
What happens where there is a breach of warranty?
Cover will be suspended until the breach has been remedied, meaning the insurer will be liable for claims after this point.
What can the insurer do in the event of a fraudulent act on the part of the insured?
Can terminate the contract without paying return premium and can also recover any amounts already paid for the claim.
Name the three methods by which an agency can be created.
- By consent
- By necessity
- By ratification
What is agency by consent?
Both parties will agree to enter into the relationship using a TOBA.
Can also be implied, i.e. wherein a commission is taken but no contract is codified.
What is agency by necessity?
Another is entrusted with the property of the principle and it becomes necessary to act in a certain way in order to protect their property.
