Requirements of Contracts
A: Two or more persons come to a mutual understanding with respect to their rights and duties.
Q: What is "an agreement"?
Agreement is the first essential element in a legally binding contract. AKA: offer and acceptance. (See page 4-3 in the textbook).
A: These are persons who claim against a policy, but who are not a party to the policy.
Q: Who is a "third-party"?
E.g., in liability claims. (See page 4-9 in the textbook).
A: This is the fair market value of property, taking into account factors that might augment or reduce the value of the property in question.
Q: What is "Actual Cash Value (ACV)"?
It's the value of an equivalent piece of property of the same age and condition and subject to the same wear and tear as the property that was lost or destroyed. AKA: cost to replace, less depreciation. (See page 4-12 in the textbook).
A: A fact that would affect a contract of insurance enough to influence an insurer's decision regarding whether to accept or reject the risk, or the premium to be set.
Q: What is a "material fact"?
E.g., opening a daycare in your home. (See page 4-21 in the textbook).
A: An illegal contract. In law, a contract that was never made, or never existed.
Q: What is a "void contract"?
The absence of a true mutual understanding is cause for the law to treat the contract as never having existed. (See pages 4-4 and 4-6 in the textbook).
A: A contract whereby one party (the insurer) agrees in return for a consideration (the premium) to indemnify another party (the insured) against loss or damage or liability arising out of the happening of a specific event or events.
Q: What is a "contract of insurance"?
Insurance contracts must contain the essential elements of ordinary contracts, plus 3 additional elements distinctive to insurance contracts. (See page 4-10 in the textbook).
A: The legal process by which an insurance company, after the payment of a loss, is assigned the rights of the insured to recover the amount of the loss from those who are legally liable for it.
Q: What is "subrogation"?
In common law, the insurer pursues subrogation in the name of the insured; under the Civil Code of Quebec, the insurer pursues subrogation in its own name. (See page 4-15 in the textbook).
A: A standard of honesty greater than that usually required in most ordinary contracts.
Q: What is "utmost good faith"?
Required of both the insured and the insurer (incl. its employees). (See page 4-21 in the textbook).
A. The value received to bind a contract.
Q: What is "consideration"?
Consideration must be money or equivalent; it must have some value; and it must be something present or future, not past consideration. (See page 4-5 in the textbook).
A: Any person (including a corporation) covered by an insurance policy.
Q: Who is an "insured"?
AKA: the policyholder. The person / organization wanting protection against loss. (See page 4-9 in the textbook).
A: This is when more than one policy has been issued to insure a given risk and the loss is divided equitably among the various policies.
Q: What is "contribution"?
It's the sharing of the loss or liability between two or more insurers covering the same risk.
Both policies must: cover the same property; the same insurable interest; insure against the same peril that caused the loss; be enforceable by law; and neither contract must contain a stipulation that it is not liable for contribution. (See page 4-17 in the textbook).
A: An incorrect statement made about a material fact.
A: What is a "misrepresentation"?
Misrep can also include an omission of certain facts, whether innocent (an oversight), fraudulent (a lie) or by extreme carelessness (no regard whether true or false). (See page 4-22 in the textbook).
A: Consent, Capacity to Contract, Cause of Contract, Object of Contract.
Q: What are the requirements of contracts in Quebec (Civil Code of Quebec)?
Consent is similar to "agreement" or "offer & acceptance in common law. Capacity to Contact is the same in common law. Cause of Contract is similar to "consideration" in common law. Object of Contact is similar to "Legality of Object" in common law. (See page 4-7 in the textbook).
A: Persons who may suffer loss of business if the property is damaged or destroyed.
Q: Who are "stakeholders with an insurable interest" in property?
People have an insurable interest in property when they will suffer an economic loss if the property were damaged or destroyed and may financially benefit by its continued existence. (See page 4-10 in the textbook).
A: When an insured releases a third party who is responsible for a loss, from the obligation to pay for the loss.
Q: What is "prejudice"?
If an insured prejudices a right of recovery, so that the insurer is deprived of the benefit of subrogation, the insured will be liable to the insurer to the extent of the prejudice. (See page 4-17 in the textbook).
A: The intentional withholding of information pertinent to a risk from an insurance company.
Q: What is "concealment"?
Concealment is the withholding of information pertinent to a risk -- silence when there exists and obligation to speak. (See page 4-22 in the textbook).
A: A cause for avoiding a contract made by a minor under certain circumstances.
Q: What is "lesion"?
Lesion results from exploitation of minors by those who are supposed to look after them. (See page 4-8 in the textbook).
A: One to whom goods or property are entrusted for a stated purpose.
Q: Who is a "bailee"?
E.g., drycleaners, moving companies, etc. (See page 4-10 in the textbook).
A: The remaining value of property after severe damage by fire or other insured peril.
Q: What is "salvage"?
Salvage is property saved from the loss. (See page 4-15 in the textbook).
A: Insurable Interest, Indemnity, Utmost Good Faith.
Q: What are the "three additional elements distinctive to insurance contracts"?
Insurance contracts must contain all the elements of ordinary contracts, plus these three additional elements. (See page 4-9 in the textbook).