Chapter 3: contract and agency

Question 1

what is contract law

Answer 1

contract of bargins- relationship between two parties
insurance contract is an agreement, enforable by law

Question 2

valid contract

Answer 2

offer and acceptance+ consideration

Question 3

intention to create legal relations:

Answer 3

business contracts intended to be binding in law

Question 4

capacity to contract

Answer 4

ability of someone to enter into legally binding relationship

Question 5

consensus ad idem

Answer 5

meeting of minds- clear about what is being covered- same risk

Question 6

legality of purpose

Answer 6

if insured tries to take out policy on stolen goods

Question 7

possibility of performance

Answer 7

action must be complete- it can’t be impossible to do so

Question 8

certainty of terms

Answer 8

policy wordings must be clear- if it is vague there may be no contract

Question 9

parties to contract

Answer 9

privity of contract- contracts are private, only parties named have rights under them

Question 10

evidence of contract

Answer 10

contract itself lies in promise each side makes- insured pay premiums and insurers provide insurance

Question 11

void ab initio-

Answer 11

contract may be invalid, if documents are not in writing to insured

Question 12

offer and acceptance

Answer 12

contract comes into existenve when one party makes an offer which the other accepts unconditionally

Question 13

uncondotional acceptance

Answer 13

unaltered terms of offer- unconditional
to be effective, acceptance must be final and unqualified agreement to the offer

Question 14

conditional acceptance

Answer 14

if new terms introduced- acceptance becomes new offer-

Question 15

postal acceptance

Answer 15

contract is accepted once postal letter has been sent

Question 16

offer and acceptance in practice

Answer 16

some insurers allow agents to accept liability on their behalf before formalities settled

Question 17

consideration

Answer 17

consideration is each persons side of bargain which supports the contract- payment
Parties can exchange promises to perform certain acts in future or promise to do so- consideration

Question 18

FCA April 2017 - regulation on fair pricing

Answer 18

insurers must disclose last years premium on renewal notice
identify customers eligible for tenure
include text to encourage clients to check cover and shop around

Question 19

insurer rights re cancellation

Answer 19

governed by t and c- PH must be given 14 days notice- some cases may be 10 or 30
if insurer cancels pro rata return of premium sent to insured for unexpired portion of risk

Question 20

PH rights re cancellation

Answer 20

PH has right to cancel without giving reason- exception is travel and baggage
Consumer must exercise rights within 30 days for payment protection or 14 days for another

Question 21

Distance marketing directive

Answer 21

requirements for cancellation of distance contracts- PH may only be required to pay for the service provided- no amount can be charged by insurer for cancellation of a payment protection contract

Question 22

Deregulation 2015

Answer 22

if policy cancelled mid term PH no longer required to return certificate of insurance

Question 23

Fulfilment

Answer 23

total loss of subject matter- policy automatically terminated

Question 24

Voidable contracts

Answer 24

insured in breach of condition
insurer can avoid paying claim if insured fails to fulfil a condition relating to a claim
misrepresentation of PH- avoid contract entirely

Question 25

breach of warranty- Marine Insurance act 1906

Answer 25

insurance contract must be compiled by insured material risk or not- warranty as risk management clause

Question 26

Breach of warranty prior to insurance act 2015

Answer 26

breach of warranty would discharge insurer from liability under policy without insurer needing to terminate contract

Question 27

Fraudulent acts in line with IA 2015

Answer 27

insurers can terminate contract without returning premium Insurer not liable to pay fraudulent claim Insurers can recover amounts already paid and terminate contract Insurers can refuse liability for all matters after fraudulent acts

Question 28

methods of creating agent/principal connection

Answer 28

principal-consent-agent principal-necessity-agent principal-ratification- agent

Question 29

agency by consent

Answer 29

relationship between principal and agent is by consent- agency by agreement- TOBA

Question 30

agency by necessity

Answer 30

person entrusted with someone elses property and necessary to act in an emergency

Question 31

agency by ratification

Answer 31

agents act without authority but principal accepts the act as being done by agent on their behalf

Question 32

agent of insured

Answer 32

independent intermediary- give advice on insurance

Question 33

agent of insurer

Answer 33

independent intermediary: surveys on insurers behalf, premiums etc

Question 34

duties of principal

Answer 34

renumeration/ indemnity- agent can claim against principals indemnity for expenses/ losses

Question 35

undisclosed principal

Answer 35

agent to act for undisclosed principal while seeming to act on their behalf- EG garages

Question 36

actual authority

Answer 36

expressed- TOBA

Question 37

implied authority

Answer 37

agent has to carry out express instructions

Question 38

apparent authority

Answer 38

unlikely 3rd party aware of agents authority- agent appointed but not permitted to carry out certain tasks