IF1.3 - Contract and Agency Flashcards
Define Contract
A contract is an agreement, enforceable by law between two or more people to do something where there is intent to create a legal relationship.
To ensure a contract is valid and enforceable it must satisfy:
offer, acceptance & consideration
void ab initio
a contract is void (as if it never existed, and premiums are returned) if it is declared invalid i.e. it is missing one of the essentials e.g. someone was tricked into signing
Good faith
neither party must mislead one another
criteria for a valid contract (not void ab initio)
- both parties have to want it
- mental capacity
- can’t mislead someone
- can’t be against public policy
- has to do what it says
- has to be clear
Unconditional acceptance
accept without altering
Conditional acceptance
make a counter offer
a counter offer…
is rejecting the original offer and return a new offer
What is consideration
Each side of the bargain which supports the contract, aka a promise to do or not to do something.
Something that has value in the eyes of the law (normally payment)
Normally a contract is made when it is received by the offeror. If posted acceptance is complete at which point.
when the letter is posted
Is there obligation for insurers to offer renewal terms?
no
In a renewal offer insurers must
clearly display the difference in premiums & encourage consumers to check their cover & shop around for the best deal at renewal.
Insurers cancellation rights
- insurers can cancel
- they must give at least 14 days notice of cancellation by a letter
- pro rata premium is returned
Policyholders cancellation rights
- if within 14 days they can cancel without penalty or reason (just have to pay the amount used of the policy) (30days for payment protection)
- Otherwise insurers can charge a flat fee for cancellation of the cover.
Policy fulfilment
if the insured object is a total loss and the insurer has paid a settlement e.g. if a car is written off.
Voidable contracts
if the policyholder breaches a policy condition the insurer may treat the policy as void.
or if the insurable interest never existed.
Ab initio contract
non-disclosure or misrepresentation of information by the policyholder.
if a claim is made the insurer doesn’t have to pay and can recover any amounts paid.
Breach of warranty contracts
A warranty must be exactly complied with and if it is not then cover will be suspended until the warranty is fixed.
define agent
someone who is authorised by a principal to bring that principal into a contractual relationship with another (third party)
what are the 3 methods of creating an agent/principal relationship
- Consent
- necessity
- ratification
What is agency by consent?
Both the agent and principal consent to enter into a legally enforceable agreement.