chapter 3

Question 1

What is rectification of a contract?

Answer 1

A court correction of a mutual error in a written agreement to reflect the true intent.

Question 2

When does a misrepresentation become actionable?

Answer 2

When it is a false statement of fact made by a contracting party that induced the other to enter the contract.

Question 3

What is the ‘duty of fair presentation’ in insurance law?

Answer 3

A non-consumer’s duty to disclose every material circumstance known or that ought to be known, under the Insurance Act 2015.

Question 4

What is the effect of frustration?

Answer 4

It automatically ends the contract, releasing both parties from future obligations.

Question 5

What is anticipatory breach?

Answer 5

When one party indicates before the due date that they won’t perform their contractual duties.

Question 6

What is accord and satisfaction?

Answer 6

Discharge of a contract where a new consideration is offered and accepted in place of the original obligation.

Question 7

What’s the difference between termination and rescission?

Answer 7

Termination ends a valid contract due to breach; rescission voids a contract as if it never existed, often due to misrepresentation.

Question 8

What kind of breaches entitle a party to terminate a contract?

Answer 8

Breach of a condition or serious breach of an innominate term.

Question 9

What is the aim of awarding damages in contract law?

Answer 9

A: To put the claimant in the financial position they would have been in if the contract had been properly performed.

Question 10

Can damages be awarded if the claimant has suffered no loss?

Answer 10

A: Only nominal damages may be awarded, such as a token amount.

Question 11

In what type of contracts can distress or injured feelings be compensable?

Answer 11

A: Only where the contract’s purpose is comfort or pleasure (not applicable to insurance contracts).

Question 12

What is a liquidated damages clause?

Answer 12

A: A pre-agreed, reasonable estimate of damages payable for specific breaches.

Question 13

What makes a penalty clause unenforceable?

Answer 13

A: If it is excessive or not a genuine pre-estimate of loss.

Question 14

What rule limits damages for indirect or unexpected loss?

Answer 14

A: The rule on remoteness of damage – losses must be reasonably foreseeable.

Question 15

What are specific performance and injunctions?

Answer 15

A: Equitable remedies that compel or prevent specific actions.

Question 16

When is restitution available?

Answer 16

A: When there has been a total failure of consideration and no benefit received.

Question 17

What is a ‘quantum meruit’ claim?

Answer 17

A: A claim for payment for services where no agreed contract exists or a contract was void.

Question 18

What doctrine limits contract rights to the original parties?

Answer 18

A: The doctrine of privity of contract.

Question 19

What key legislation allows third parties to enforce contract terms?

Answer 19

A: The Contracts (Rights of Third Parties) Act 1999.

Question 20

What must be true for a third party to enforce a term under the 1999 Act?

Answer 20

A: They must be named or belong to a class specified in the contract, and the contract must intend to confer a benefit on them.

Question 21

Assignment of subject matter:

Answer 21

E.g. Selling an insured car ends the policy unless stated otherwise.

Question 22

Assignment of the benefit:

Answer 22

The payout from a valid claim can be assigned to someone else (e.g. a builder).

Question 22

Assignment of the benefit:

Answer 22

The payout from a valid claim can be assigned to someone else (e.g. a builder).

Question 23

Assignment of the contract:

Answer 23

Usually not allowed without insurer consent (contracts are personal).

Question 24

What is the effect of assigning the subject matter of an insurance contract without notifying the insurer?

Answer 24

The contract usually ends automatically because the insured no longer has an insurable interest.

Question 25

What legislation governs the statutory assignment of debts and contractual rights?

Answer 25

Section 136 of the Law of Property Act 1925.

Question 26

What type of assignment allows the assignee to sue in their own name?

Answer 26

Statutory assignment under s.136 of the Law of Property Act 1925.

Question 27

Can the benefit of an insurance contract be assigned after a loss has occurred?

Answer 27

Yes, it can be assigned either before or after the loss.

Question 28

What must be provided to make an equitable assignment valid?

Answer 28

Clear intention to assign or instruction to the debtor to perform for the assignee.

Question 29

What is novation in the context of assignment?

Answer 29

It's the cancellation of one contract and creation of a new one with the agreement of all parties involved.

Question 30

What kind of insurance policy is most commonly assignable?

Answer 30

Marine cargo insurance policies.

Question 31

Absolute vs Conditional

Answer 31

Absolute assignment: Complete transfer of policy ownership. Conditional assignment: Often used as security (e.g. mortgage). Policy returns to original owner when debt is repaid.

Question 32

Equitable assignment:

Answer 32

Done informally (e.g. handing over the policy) if intention to assign is clear.

Question 33

Why are life insurance policies freely assignable?

Answer 33

Because the risk (the life insured) does not change when the policy is assigned.

Question 34

In a life policy assignment, who remains the life insured?

Answer 34

A2: The original person whose life is insured under the policy.

Question 35

What is a conditional assignment of a life policy?

Answer 35

A3: An assignment used as security (e.g. mortgage) where the policy can be recovered once debt is repaid.