Page 63 - DCOM309_INSURANCE_LAWS_AND_PRACTICES

Insurance Laws and Practices

Notes should be clearly understood by each of them. Parties entering into the contract should enter
into it by their free consent. The consent will be free when it is not caused by any of these:

Coercion
Undue influence
Fraud
Misrepresentation

Mistake.
When free consent is not there, the contract becomes voidable at the option of the party whose
consent was not free. In case of fraud, the contract would be void.

4.3.5 Legal Object

You must note that the purpose for which the agreement is entered into should not be illegal. It
should not be against the public policy, e.g., insuring contraband goods, insuring dacoits and
smugglers.

To make a valid contract, the object of the agreement should be lawful.
An object that is
Not forbidden by law, or
Not immoral, or

This does not defeat the provisions of any law.
If the object of Insurance like the consideration is found to be unlawful, the policy is void.

Self Assessment

Fill in the blanks:
10. An agreement with a mentally ………………………… person does not form a valid contract.

11. A contract by a ………………………… is void excepting contracts for necessaries.
12. When free consent is not there, the contract becomes …………………………. at the option
of the party whose consent was not free.

4.4 Insurance Documents

You must be aware that there are various insurance documents used for different types of
insurance, which are essential for all classes of insurance business. The object of insurance
documents is given to the insurer full particulars of the risk against which insurance protection
is desired. It also provides evidence of contract into which the parties have entered.

Proposal Form

The company’s printed proposal form is normally used for making an application for the required
insurance cover. The proposal form contains questions designed to elicit all material information
about the particular risk proposed for insurance. The number and nature of questions vary
according to the particular class of insurance covered.

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