Contracts Flashcards
Five elements of forming a legal contract
CLOAC Consideration Legal purpose Offer Acceptance Competent parties
Consideration
Exchange of value. Money and statements made on application
Legal purpose
Risk transfer (insurance) does not violate the law
Offer
A proposal made by one of the potential parties to the contract
Acceptance
Must be unconditional and unqualified otherwise there is a counteroffer
Competent parties
Legal age
Sane
Sober
Adhesion
Policy is written by the insurance company.
Insured has no input.
If not clear, the court will take the side of the insured.
Aleatory contract
Unequal value. Pay small premium and have a large claim or pay premiums your whole life with no claims
Utmost good faith
The insured and insurance company have the right to expect honesty from each other
Unilateral
One sided. Only one party of the contract (the insurer) is legally bound to perform under the contract
Personal
Contracts between the insurance company and the insured. Cannot be changed to someone else
Conditional
There are certain conditions for the contract to be/ remain in effect
Indemnity
The contract is intended to restore the insured to their previous financial state. No more no less
Indemnification
The principal of restoring an insured to his pre-loss financial state.
Representation
A statement that the applicant believes to be true
