Chapter 5 - Insurance contract formation and insurable interest

Question 1

What is offer and acceptance?

Answer 1

An insurance contract will, therefore, come into existence once the offer made by one party is unconditionally accepted by the other.

Question 2

What is invitations to treat?

Answer 2

Treat which are merely invitations to the other party to enter into negotiations.

Question 3

Is communication of acceptance necessary?

Answer 3

In principle, an offer cannot be accepted by doing nothing and that acceptance must generally be communicated to the other party.

Question 4

What must be agreed?

Answer 4

• the nature of the risk and the subject matter of insurance (what is to be insured and what perils are to be covered);
• the duration of the contract; and
• the amount of the premium

Question 5

What is a unilateral offer?

Answer 5

A unilateral contract is one which creates obligations only on the offeror who promises to do something (e.g. make a payment) if the other party performs an act.

Question 6

What is contractual intention?

Answer 6

No legally binding contract will be formed unless the parties intended to be legally bound.

Question 7

What is consensus ad idem?

Answer 7

agreement between different people or groups about the exact meaning of a contract

Question 8

What is the process of cancellation by the insurer?

Answer 8

Insurers often include a clause allowing them to cancel the policy mid-term, having given the required period of notice to the insured. In such cases a pro rata return of premium is
likely to be granted.

Question 9

What is the process of cancellation by the insured?

Answer 9

The insured may also be given the right to cancel the policy although something less than a full pro rata return is usually then allowed.