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THE LAW OF INSURANCE CONTRACT - Coggle Diagram
THE LAW OF INSURANCE CONTRACT
1.PROPOSAL AND ACCEPTANCE
*PROPOSAL
-section 2(a) of Contract Act 1950
"When a person signifies to another his willingness to do or to abstain from doing anything with a view of obtaining the assent of that other to do the act or abstinence , he said to make a proposal (offer)
-There must be an offer by one party (offeror/insured) and an acceptance of it by the other (offeree/insurance company)
must have attention of the offeree before before it can be accepted (identified person,specified class of persons or to the world at large)
-Must be definite and communicated.
-mere silance by the insurer cannot amount to acceptance
-in writing
-verbal communication
-by conduct
-Proposal can be revoked at any time before the communication of the acceptance .
-once offered has been accepted,the offer cannot be withdrawn
-the offer is made by the insured to be insurer by completing the proposal form
have a following choices
i.Reject the proposal
ii.Making a counter-offer
iii.Not to acr on the offer
iv.Accept the proposal in accordance with its term
Revocation of proposal
Section 5(1) Contract Acr 1950
Section 6 Contract Act
*INVITATION TO TREAT
ITT will not have all element of a proposal
-ITT IS AN OFFER TO MAKE OFFER
Pharmaceutical Society Of GB vs Boots Cash Chemist Ltd (1953) 1 QB 401
Spencer v Harding (1870) LR 5 CP 561
EXAMPLES:
-enquiry and provision of information.
-advertisement including window display.
-call for tender and binding .
-tender is all ITT and the person who announced the tender might accept or refuse the offer made by the readers of the said tender
-distribution of brochure and application form.
A VALID PROPOSAL
-Section 4(1) Contract Act 1950
The communication of a proposal is complete when it comes to the knowledge of the person to whom it is made.
ACCEPTANCE
-must be absolute and unconditional
-must be communicated to the offeror
-must be expressed in some usual and reasonable manner or by performanceof of the condition
Silence
this kind of reaction just total disregard of the proposal is not acceptance as there is no positive act that cant relate to the proposal
Modes of Acceptance by the Insurer
Formal Acceptance
-it is binding contract although policy has not been issured or premium not paid.
-importance to insurer expressly stated in the letter of acceptance that cover will only start on from the day the premium is received if they intend not to accept liability by some mode of a formal acceptance which replying a letter of acceptance to proposer
Issuance Of Policy
-once the policy has been issued,it is deemed that the offer has been accepted and the contract of insurance comes in force
-if the insurer,on receipt of a proposal,accepts the proposal by issuance policy which contain certain terms which will amount to a counter-offer, the insured who retains the policy can be held to have accepted the counter-offer
-the insured have given the ample time to read and understand the policy.
SECTION 148 OF THE INSURANCE ACT 1996 give the right to the insured to return the policy to the insurer within 15days from the date of policy delivered.
Acceptance Of Premium
the proposal form submitted together with the premium will be made it is binding contract.
unconditional acceptance of the premium would indicative of acceptance of the offer and a binding contract will come into force
ACT INVOLVES
-Section 2 (b) of CA 1950 refers to 'signifies his assent'
-Section 7 of CA 1950
ACCEPTANCE MUST BE COMPLETED BEFORE THE PROPOSAL BECOMES INVALID
ACCEPTANCE THROUGH POST
SECTION 4(b) CA
-as against the proposer when it is put in a course of transmission to him so as to be out of the power of the acceptor
-as against the acceptor when it to the knowledge the proposer
Entores Ltd v Miles Far East Corp (1955) 2 QB per Lord Denning
Ignatius v Bell (1913) 2 FMSLR 115
-Brinkibon (1983) 2 AC 34
REVOCATION OF A PROPOSAL OR AN ACCEPTANCE
Section 5(1) CA 1950 V Section 5 (2)
INTENTION TO CREATE LEGAL BOUND
Intention to be legally bound is an essential element of a valid, enforceable contract. It means that all parties to a contract must accept the terms of the contract with an intention of forming a legally binding relationship.
Appleson v. Littlewood
Jones v Vernon's Pool
Presumption of Intention
1) Domestic Agreement
-relates to domestic matters and the parties involved are family members. The presumption is that the parties do not intend to be legally bound and not enforceable by law.
BALFOUR V BALFOUR
JONES V PADAVATTON
2) Social Agreements
-A social agreement are made between friends are made without an intention of being enforceable.
BUCKPITT V OATES
3) Business Agreements
-Relates to business matter involving businessmen, employers and employees, sellers and buyers. Contray to domestic and social agreements, it involve do have the intention to be bound.
CARLILL V CARBOLIC SMOKE BALL CO.
EDWARD V SKYWAYS
CONDERATION
Section 26,Contract Act 1950
It is not sufficient that only a party provides consideration. It is essential that parties to a contract give consideration.
Having stressed of essential of consideration, there is two important point ;
consideration need NOT be adequate
failure of consideration does invalidate a gift.
Section 2(d) CA 1950
1.An act done, abstinence observed or a promise given in connection with a contract.
-act
-abstinence
-promise
-consideration may be provided by another person
-consideration may benefit another person
In a strict legal sense, NOT ALL benefits derived from a person actually amount consideration capable of supporting contract . NOT ALL liabilities assume by a person are deemed consideration.
1.Friendship and other relationship
2.Love and affection
3.Good behavior
4.Past acts
5.Legal duty
Agreement made without consideration is void
-not legally valid
-parties does not enjoy any right and do not suffer any liability.
-parties cannot take any remedial action to make the contract valid.
FOUR EXCEPTION
1) Section 26(a) CA 1950
AGREEMENT BASED ON NATURAL LOVE AND AFFECTION
2) AGREEMENT TO REWARD PAST ACT OR AGREEMENT BASED ON LEGAL OBLIGATION
3) AGREEMENT TO PAY BARRED DEBT
4) PROMISE TO DISPENSE WITH OR REMIT PERFORMANCE OF A PROMISE
LEGAL CAPASITY
Section 10 of the CA 1950 states that
'All agreement are contract if they are made by the free consent of parties competent to contract for a lawful consideration and with a lawful object and are not hereby expressly declared to be void.
WHY?
If a person enters into what is supposed to be a contract but he does not have the capasity to do so , therefore the contract will not be enforceable. Legally, he will not be able to demand that the promise made to him under the agreement to be fulfilled.
According to Section 11 CA 1950
satisfy 3 criteria
attaintment of the age of majority
2.possession of a sound mind
3.not being legally disqualified
CONSENT
Section 13 of CA 1950
Two or more person are said to be consent when to they agree upon the same things in the same sense.
VOID AGREEMENT
Agreement not legally recognised
2.not right legal/liability
3.agreement cannot be made valid
VOIDABLE AGREEMENT
1.agreement valid until made void
2.existance of right/ liability
3.whether the agreement is void or valid depends on action of the aggrieved parties.
Section 14 OF CA 1950 ,consent is said to be free when
COERCION,Section 15
2.UNDUE INFLUENCE,Section 16
3.FRAUD,Section 17
4.MISREPRESENTATION,Section 18
5.MISTAKE,Section 21,22,23
ILLEGAL CONTRACT
defines as a lawful contract. To constitute an agreement to be valid and binding contract, the agreement made must be for a lawful consideration and with lawful objects.
Section 24 Of CA 1950
THE CONSIDERATION OR OBJECT OF AN AGREEMENT IS LAWFUL UNLESS IT IS FORBIDDEN BY LAW.
1) if permitted it would defeat any law
2) it is fraudulent
3) it involves or implies injury to the person or property of another
4) the court regards it is immoral or opposed to public policy.
All agreement with unlawful object or consideration is VOID
considered as void at common law but not necessarily illegal;
i.SECTION 27 CA 1950
Restraint of marriage
ii.SECTION 28 CA 1950
Agreement in restraint of trade void
iii.SECTION 29 CA 1950
Agreement in restraint of legal proceeding void
iv.SECTION 31 CA 1950
Agreements by war of wager void
DISCHARGE OF CONTRACT
End of contractual relationship. It is also known as an absence of contracrual liabilities or rights. Discharge happen when there is an inability to sue under contract . Therefore there are contractual liabilities are discharged.
CAN BE CLASSIFIY INTO FIVE WHICH ARE
I.By performance
II.By Agreement
III.By novation
IV.By breach of contract