Chapter3- Contract And Agency

Question 1

Offer and acceptance?

Answer 1

One party makes an offer which the other accepts unconditionally.

Question 2

Unconditional acceptance

Answer 2

Accepting the offer without altering any of the terms.

Question 3

Conditional acceptance

Answer 3

Acceptance of an offer with a counter offer that involves altering the terms of agreement.

Question 4

Consideration

Answer 4

Each persons side of the bargain which supports the contract. This could be the payment of money or exchange of promises.

Question 5

Agency

Answer 5

One who is authorised by a principal to bring that principal into a contractual relationship with another,a third party.

Principal third party

Question 6

How to create an Agent/principal relationship

Answer 6

By linking the principal to the agent using either consent/ necessity or ratification.

Question 7

Agency by consent?

Answer 7

This is the most usual way of creating a relationship between principal and agent.

Usually using an explicit form involving the TOBA

Or an implied form which involves work being undertaken and commission paid but nothing actually being written down.

Question 8

Agency by necessity?

Answer 8

This arises where a person is entrusted with someone else’s goods and it becomes necessary to act in a certain way in order to preserve the property in an emergency.

Question 9

Agency by ratification?

Answer 9

Where an agent acts without authority, but the principal accepts the act as having done on their behalf.

Question 10

What is obedience?

Answer 10

One of the prime duties owes by an agent to their principal is the duty to obey instructions. If the agent fails to comply, they are liable to be sued by their principal for damages.

Question 11

Express authority?

Answer 11

Arises from the terms of an agency agreement, which may be oral or in writing. As already indicated, it would be unusual for this to be oral in an insurance context, all terms would be expressed in a TOBA

Question 12

Termination of agency?

Answer 12

An agency may be terminated in a number of ways:

• by mutual agreement by the principal and agent.
• by the agency being terminated by either the principal or the agent
• by the death,bankruptcy or insanity of either party.

Question 13

TOBAs

Answer 13

Insurers and intermediaries alike have tended to develop bespoke TOBAs reflecting their particular methods of doing business. Model TOBAs have been produced by a number of market associations on behalf of their members.

Question 14

What duties does and agent have to the principal?

Answer 14

Obedience
Personal performance
Due care and skill
Good faith
Accountability

Question 15

What is contract law?

Answer 15

An agreement,enforceable by law, between insurer and insured.