Chapter 3: contract and agency Flashcards
what is contract law
contract of bargins- relationship between two parties
insurance contract is an agreement, enforable by law
valid contract
offer and acceptance+ consideration
intention to create legal relations:
business contracts intended to be binding in law
capacity to contract
ability of someone to enter into legally binding relationship
consensus ad idem
meeting of minds- clear about what is being covered- same risk
legality of purpose
if insured tries to take out policy on stolen goods
possibility of performance
action must be complete- it can’t be impossible to do so
certainty of terms
policy wordings must be clear- if it is vague there may be no contract
parties to contract
privity of contract- contracts are private, only parties named have rights under them
evidence of contract
contract itself lies in promise each side makes- insured pay premiums and insurers provide insurance
void ab initio-
contract may be invalid, if documents are not in writing to insured
offer and acceptance
contract comes into existenve when one party makes an offer which the other accepts unconditionally
uncondotional acceptance
unaltered terms of offer- unconditional
to be effective, acceptance must be final and unqualified agreement to the offer
conditional acceptance
if new terms introduced- acceptance becomes new offer-
postal acceptance
contract is accepted once postal letter has been sent
offer and acceptance in practice
some insurers allow agents to accept liability on their behalf before formalities settled
consideration
consideration is each persons side of bargain which supports the contract- payment
Parties can exchange promises to perform certain acts in future or promise to do so- consideration
FCA April 2017 - regulation on fair pricing
insurers must disclose last years premium on renewal notice
identify customers eligible for tenure
include text to encourage clients to check cover and shop around
insurer rights re cancellation
governed by t and c- PH must be given 14 days notice- some cases may be 10 or 30
if insurer cancels pro rata return of premium sent to insured for unexpired portion of risk
PH rights re cancellation
PH has right to cancel without giving reason- exception is travel and baggage
Consumer must exercise rights within 30 days for payment protection or 14 days for another
Distance marketing directive
requirements for cancellation of distance contracts- PH may only be required to pay for the service provided- no amount can be charged by insurer for cancellation of a payment protection contract
Deregulation 2015
if policy cancelled mid term PH no longer required to return certificate of insurance
Fulfilment
total loss of subject matter- policy automatically terminated
Voidable contracts
insured in breach of condition
insurer can avoid paying claim if insured fails to fulfil a condition relating to a claim
misrepresentation of PH- avoid contract entirely
breach of warranty- Marine Insurance act 1906
insurance contract must be compiled by insured material risk or not- warranty as risk management clause
Breach of warranty prior to insurance act 2015
breach of warranty would discharge insurer from liability under policy without insurer needing to terminate contract
Fraudulent acts in line with IA 2015
insurers can terminate contract without returning premium
Insurer not liable to pay fraudulent claim
Insurers can recover amounts already paid and terminate contract
Insurers can refuse liability for all matters after fraudulent acts
methods of creating agent/principal connection
principal-consent-agent
principal-necessity-agent
principal-ratification- agent
agency by consent
relationship between principal and agent is by consent- agency by agreement- TOBA
agency by necessity
person entrusted with someone elses property and necessary to act in an emergency
agency by ratification
agents act without authority but principal accepts the act as being done by agent on their behalf
agent of insured
independent intermediary- give advice on insurance
agent of insurer
independent intermediary: surveys on insurers behalf, premiums etc
duties of principal
renumeration/ indemnity- agent can claim against principals indemnity for expenses/ losses
undisclosed principal
agent to act for undisclosed principal while seeming to act on their behalf- EG garages
actual authority
expressed- TOBA
implied authority
agent has to carry out express instructions
apparent authority
unlikely 3rd party aware of agents authority- agent appointed but not permitted to carry out certain tasks
