Chapter Two

Question 1

What is the difference between unconditional acceptance and conditional acceptance in contract law?

Answer 1

Unconditional acceptance occurs when the acceptance does not alter any terms of the offer, while conditional acceptance introduces new terms creating a counter offer.

Question 2

What is the principal of indemnity?

Answer 2

The principal of indemnity ensures that the insured is compensated to the same financial position they were in before the loss, without making a profit from the claim.

Question 3

What does ‘indemnifying the insured’ mean?

Answer 3

Indemnifying the insured means restoring them to the financial position they were in before the loss occurred.

Question 4

What are the essential elements of a valid contract?

Answer 4

The essential elements of a valid contract include offer and acceptance, consideration, intention to create a legal agreement and legality.

Question 5

What is the significance of ‘good faith’ in insurance contracts?

Answer 5

Good faith requires both parties to act transparently and disclose all material information to each other during contract negotiations.

Question 6

What does subrogation allow insures to do?

Answer 6

Subrogation allows insurers to take over the insured’s rights to recover payment from a third party responsible for the loss after indemnifying the insured.

Question 7

What is ‘insurable interest’?

Answer 7

Insurable interest is the legal right to insure arising from a financial relationship recognised by law between the insured and the subject matter of insurance.

Question 8

What is the main purpose of an insurance contract?

Answer 8

The main purpose of an insurance contract is to pay claims to policyholders who suffer loss or damage covered by the terms of the insurance.

Question 9

What is the principle of contribution in insurance?

Answer 9

The principal of contribution states that if two or more policies cover the same risk they should share the loss in a proportionate manner.