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C11 > Chapter 4 > Flashcards

Chapter 4 Flashcards

1
Q

What defines a contract under common law?

A

A contract is an agreement enforceable at law.

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2
Q

What are the two key considerations for identifying a contract?

A

An agreement may not always be enforceable by law.
An obligation enforceable by law can exist without an agreement.

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3
Q

What happens if a contract’s conditions are not met under common law?

A

The contract is void.

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4
Q

What level of mistakes can void a contract?

A

Only serious mistakes (e.g., identity of a party or subject matter). Minor errors (e.g., spelling) do not void a contract.

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5
Q

What is “consideration” in a contract?

A

It represents the value exchanged and evidence of the parties’ intent to be bound.

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6
Q

What are the three rules of consideration?

A

It must have a price (e.g., money or its equivalent).
It must have value (e.g., legal transactions for $1 are valid).
It must be in the present or future (past consideration is invalid).

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7
Q

What is an example of past consideration?

A

Returning a lost dog and discovering a reward after doing so provides no legal claim.

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8
Q

What is an exception to the requirement of a “price” in consideration?

A

A contract under seal assumes consideration even without a stipulated price.

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9
Q

Why is genuine intention required in contracts?

A

To ensure parties intend to create a legally binding agreement.

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10
Q

What is an example of a non-binding agreement?

A

Promising to attend a dinner party.

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11
Q

Who has restricted legal capacity to contract?

A

infants/minors
Insane or mentally incompetent persons
Intoxicated persons

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12
Q

What happens when a business owner contracts under a trade name?

A

The contract must be made with the owner(s), not the business name, unless it is a limited company

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13
Q

What makes a contract unenforceable?

A

Forbidden by law (e.g., payment for stolen property).
Against public policy (e.g., price-fixing).
For committing a crime (e.g., trafficking drugs).

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14
Q

What are the four requirements for a valid contract under Quebec law?

A

Agreement (offer and acceptance)
Consideration
Genuine intention
Capacity to contract

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15
Q

What constitutes an agreement under Quebec law?

A

A meeting of the minds evidenced by offer and acceptance.

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16
Q

What are the rules of acceptance in Quebec?

A

Acceptance must be unconditional.
It must be communicated.
It must meet the offer’s requirements.

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17
Q

What happens if acceptance is delayed or conditional?

A

It is considered a counter-offer, not acceptance.

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18
Q

What is the meaning of “capacity to contract”?

A

The legal ability to understand and engage in a contract.

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19
Q

Who is protected under diminished capacity provisions in Quebec?

A

Minors
Persons declared legally incompetent by the court

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20
Q

What is “lesion” in Quebec law?

A

Exploitation of a minor or incapacitated person, which can void a contract.

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21
Q

What is the “object of the contract”?

A

The subject matter or obligation (e.g., goods or services).

22
Q

What is a “cause of contract”?

A

The reason for entering into a contract (e.g., a financial obligation).

23
Q

What are four causes of contract nullity in Quebec?

A

Error (e.g., misunderstanding of vital details).
Fraud (e.g., misrepresentation of facts).
Violence or fear (e.g., coercion).
Lesion (e.g., exploitation).

24
Q

What are the key elements distinctive to insurance contracts?

A

Insurable interest
Indemnity
Utmost good faith

25
Q

What is “insurable interest”?

A

A financial stake in the subject insured.

26
Q

What is an example of insurable interest in property?

A

Owners of property
Tenants who may lose business from property damage
Bailees responsible for others’ property

27
Q

What is an example of insurable interest in liability?

A

A contractor insures liability for damages caused by construction activities.

28
Q

What is insurable interest in life and health insurance?

A

Individuals have interest in their own life, spouse, children, or financial dependents.

29
Q

What is the Principle of Insurable Interest?

A

the insured must have a financial or recognized interest in the insured item and stand to suffer a loss if the event occurs.

30
Q

What is the Principle of Indemnity?

A

ensures the insured is compensated only to the extent of their financial loss, restoring their financial position without resulting in profit.

31
Q

What are the methods to calculate indemnity?

A

Actual Cash Value (ACV): Replacement cost minus depreciation.
Replacement Value: Cost to replace or repair without deducting depreciation.
Guaranteed Replacement Cost: Full replacement cost, even if it exceeds policy limits.
Valued Contracts: Pre-determined value for unique or hard-to-value items.

32
Q

What is Actual Cash Value (ACV)?

A

ACV is the cost of replacing property minus depreciation due to age, wear, and tear.

33
Q

What is Replacement Value?

A

Replacement value is the cost of replacing or repairing the property with no deduction for depreciation.

34
Q

What is Salvage?

A

refers to property remaining after a loss that still has monetary value. If the insurer pays for a total loss, it may sell the salvage to recover some of its loss.

35
Q

What is Subrogation?

A

allows the insurer to recover losses from a third party responsible for the damage after indemnifying the insured.

36
Q

What is Contribution?

A

ensures that if multiple insurance policies cover the same loss, the insured cannot claim more than the loss amount. The insurers share the liability proportionately.

37
Q

What is a Valued Contract?

A

pays a pre-determined amount for a total loss, usually for unique or hard-to-value items like antiques or jewelry.

38
Q

What is Guaranteed Replacement Cost?

A

full replacement cost even if the replacement exceeds the policy limit, provided specific conditions are met (e.g., proper insurance amount at inception).

39
Q

Can insurers contract out of contribution in Quebec?

A

No, Any provision limiting payment to a rateable proportion is null and void under Quebec’s general policy conditions.

40
Q

What is excess insurance?

A

Excess insurance means the policy covers only the amount of the loss that exceeds the limits of another insurance policy.

41
Q

What happens when both policies contain excess provisions?

A

Courts rule that each insurer pays a rateable proportion, effectively negating the excess provision.

42
Q

What does utmost good faith imply?

A

Utmost good faith requires both the insurer and the insured to act with honesty and fully disclose all material facts.

43
Q

Why is utmost good faith essential in insurance contracts?

A

The insured knows the risk they want to insure, while the insurer accepts payment in advance for a potential indemnity. Both rely on trust for the contract to function.

44
Q

What is a material fact?

A

any fact that would influence an insurer’s decision to accept a risk, set premiums, or apply conditions.

45
Q

What happens if material facts are misrepresented or withheld?

A

The policy becomes voidable at the insurer’s option.

46
Q

What is misrepresentation?

A

incorrect or omitted statement about a material fact, which can be innocent, fraudulent, or due to extreme carelessness.

47
Q

What is innocent misrepresentation?

A

An honest mistake about a material fact.

48
Q

What is non-disclosure?

A

Failure to reveal material facts when there is a duty to disclose them.

49
Q

What is the effect of non-disclosure?

A

It makes the policy voidable if the undisclosed fact is material.

50
Q

What are the two time periods for material facts?

A

Up to contract formation: Duty to disclose material facts during negotiations.
After contract formation: Duty to disclose new facts that arise during the policy period.

51
Q

What is the insurer’s right if misrepresentation or non-disclosure is discovered?

A

can void the policy or choose to continue it. However, the insurer must not give the policyholder any reason to believe the contract remains valid if it decides to void it.

52
Q

How do statutory provisions protect policyholders?

A

Provincial and territorial insurance laws prevent insurers from voiding policies for minor inaccuracies, ensuring fairness.

C11 (9 decks)

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