Professional Documents
Culture Documents
Chapter
McGraw-Hill/Irwin
1. Nature of General
Contract
Offer and Acceptance;
Deals begin when one person makes a
proposal to exchange something of
value with another person. The proposal
to make an exchange is called the offer.
If the second person agrees to the
exchange, this is called acceptance.
1. Nature of General
Contract
Competency of the Parties;
Majority
Persons of Sound Mind
Other Disqualification
1. Nature of General
Contract
Legal Consideration;
The presence of a lawful consideration is
essential for a legal contract.
The insurer must have some
consideration (premium) in return of his
promise to pay a fixed sum (sum
insured) at maturity or death.
Legal Objective;
The objective will be legal only when
there is insurable interest and when the
object is legal.
2. Insurable Interest
Pecuniary interest arises out of the
pecuniary relationship that exists
between the policy-holder and the life
assured.
Categories;
Own life
Others life;
Where proof is not required
Proof is required
Business relationship
Family relationship
2. Insurable Interest
Classification
Insurable
Proof
Interest
Business
not Required
Relation
2. Insurable Interest
Insurable Interest in Owns Life
The person will continue to gain
financially while surviving.
Will suffer loss if he is dead because he
will be unable to earn or to protect the
property.
Unlimited insurable interest
Loss cannot be measured in terms of
money
So no limit can be placed
2. Insurable Interest
Insurable Interest in Others Life;
Proof not Required
Wife has insurable interest in the life of her husband
Husband has insurable interest in the life of wife
Proof required
Business relationship
A creditor has in the life or his debtor
A trustee has insurable interest in respect of the interest of
which he is trustee
A surety has insurable interest in the life of his principal
A partner has insurable interest in life of each partner
An employer has in the life of a key-person
An insurer has in the life assured.
2. Insurable Interest
Family Relationship;
The insurable interest may arise due to family
relationship if pecuniary interest exists
between the policy-holders and life assured.
Mere relationship or ties of blood and of
affection does not constitute insurable
interest.
The proposer must have a reasonable
expectation of financial benefit from the
continuance of the life of the person to be
insured or financial loss from the his death.
Services;
Only to spouse, not to relatives
Must have a financial relationship
between the proposer and the assured.
Should be Valid;
The Legal Responsibility May be
Basis;
Must be Definite;
Legal Consequence;
Legal Consequence;
Non-disclosure leads to a voidable contract
Indisputability;
Contest provision
3. Warranties
Representation;
Information given by a proposer for insurance to the
insurer during the negotiations is a representation.
False or untrue representation may lead to a
voidable contract
Warranties;
Informative warranties the proposer is expected to
disclose all the material facts to the best of
knowledge and belief.
Promissory warranties relating to the future may
be statements about his expectations or intentions
Breach of Warranties;
5. Proximate Cause
The efficient or effective cause which
causes the loss (peril)
If the peril is insured, the insurer will
pay
In life insurance the doctrine of Causa
Proxima is not applicable.
War-risk
Suicide
Accident benefit
6. Assignment and
Nomination
Assignment;
Freely endorsed in the policy or by a
separate deed
Notice must be given to the insurer
Once the assignment is completed, it cannot
be revoked
Nomination;
Nomination can be assigned at any time by
the holder of the insurance
Can be cancelled before maturity but notice
must be given to the insurer
7. Return of Premium
Generally cannot be refunded unless;
The insurer is incapable to run the risk
A void contract on account of
misrepresentation or breach of
warranties
The insured can claim the return of
premiums paid
8. Other Features
Aleatory Contract;
Unilateral Contract;
Conditional Contract;
Contract of Adhesion;
Not a Contract of Indemnity;