This book is also available in other formats: View formats. Contract Law, Second Edition is a comprehensive and informative account of Irish contract law which contains all of the developments since the first edition was published in Building on the original material of the first edition, this edition contains two new chapters which examine the topics of: - How to successfully make contracts - Remedies other than damages, namely specific performance, injunctions and restitution The law relating to contracts is set out and explained under clear headings and in straightforward language.
In addition, every major Irish case on contract law is considered.
Particular emphasis is placed on practical matters such as the construction of contracts, breach of contract and contractual remedies. This edition also includes a large number of new cases from the High Court, Court of Appeal and Supreme Court on every area. Most of the cases involve commercial disputes, as consumer problems are now in practice resolved by the Financial Ombudsman Service, which has taken over on a statutory basis the functions of the Insurance Ombudsman Bureau. The defence of lack of insurable interest should not defeat a legitimate commercial transaction.
Misrepresentation and non-disclosure. Such a term, to be classified as a warranty should meet the following requirements: 1 a term which goes to the root of the transaction; 2 it bears materially on the risk of loss; 3 damages would be an unsatisfactory or inadequate remedy for its breach. The duties do not extend to the post-contractual stage but remember that insurance contract may provide otherwise if the parties agree on it.
The parties to an insurance contract is under the duty to act in good faith throughout their contractual relationship, however, this duty is not the same as that of the pre-contractual duty. The post-contractual duty may appear in the form of e.
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The post-contractual duty of good faith is governed by common law as neither the MIA nor the Act refers to the post-contractual duty. Conditions in insurance policies. There is no doctrine of 'repudiation of a claim' for breach of insurance conditions. If a term is a mere condition its breach entitles the innocent party to repudiate the policy if the term is so serious that goes to the root of the contract. The English courts noted that if the condition is not a condition precedent any breach of it will almost certainly not give the insurers any defence to the claim - except claiming damages if proved.
Breach of condition precedent to insurer's liability discharges the insurer from liability for the breach that is tainted by the breach. These amendments clear the way for the Act to come into force. The Law Commission is a statutory independent body created to keep the law under review and to recommend reform where it is needed. The commission last considered insurance contract law in , when it looked at non-disclosure and breach of warranty.
It recommended reforms to the law but these have not been implemented. In January the Law Commission together with the Scottish Law Commission launched a new review of insurance contract law, beginning with a "scoping paper" inviting feedback on areas of insurance law which should be covered in the review. As anticipated, the Act made changes to the law of non-disclosure, to bring the law in line with common industry practice and the rulings of the Financial Ombudsman Service.
In consumer insurance, the duty of disclosure was abolished by the CIDRA, therefore, in consumer insurance the duty is to take reasonable care not to make a misrepresentation. CIDRA came into force on 6 April and applies to all 'consumer insurance contracts' made on or after that date. A 'consumer insurance contract' is a contract of insurance between: a an individual who enters into the contract wholly or mainly for purposes unrelated to the individual's trade, business or profession; and b an individual who carries on the business of insurance and who becomes a party to the contract by way of that business whether or not they are in accordance with the rules of the Financial Services and Markets Act That is if:.
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The burden of proof that a qualifying misrepresentation was deliberate or reckless is on the insurer. In this respect, the Act also states that unless the contrary is shown, it is presumed that:. Insurers' remedies for qualifying misrepresentations under CIDRA Qualifying misrepresentations were deliberate or reckless : the insurer may avoid the contract if a qualifying misrepresentation was deliberate or reckless.
In such a case, the insurer need not return any of the premiums paid, except to the extent if any that it would be unfair to the consumer to retain them. Qualifying misrepresentation was careless : in such a case, the insurer's remedies are based on what it would have done if the consumer had exercised reasonable care not to make a misrepresentation:. CIDRA also states that where a life policy is taken out by the insured on the life of another person L , where L is not himself a party to the policy, any information provided to the insurer by L is to be treated as having been provided by the insured himself.
For example, if a wife takes out a policy on the life of her husband, and the husband deliberately mis-states facts about his health, the insurers will have the appropriate remedy against the wife as the insured.
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The insurer also retains its rights under the Act against the wife in respect of any false statements made by her. Insurance Act The three areas of insurance law that the Insurance Act IA reformed were mentioned above. The details of these reforms are as follows:. Duty of good faith in business insurance IA renamed the duty as the duty of 'fair presentation of the risk'. The fair presentation of the risk is achieved by 1 disclosing to the insurer the material facts that the insured knows or ought to know 2 not misrepresenting material facts to the insurer.
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The duty applies pre-contractually. The materiality test is the same as that of under the MIA and common law: objective prudent underwriter test. IA made the inducement a statutory requirement to seek remedy for breach of the duty of fair presentation of the risk. IA also introduced some examples not exhaustive of material facts and the Act introduced a proportionate remedy similar to the remedy introduced by CIDRA which was mentioned above.
Warranties and terms not relevant to actual loss. IA did not introduce any law reform in terms of creation or interpretation of warranties except that IA abolished the basis of the contract clauses in business insurance. The Act reformed the remedy for breach of a warranty. Accordingly, the insurer is not liable for the loss which occurs between the time that the assured breaches the warranty and remedies the breach. Thus, breach of a warranty can be remedied under IA. IA also introduced a section in relation to risk clauses which do not define the risk as a whole but compliance with the term would tend to reduce the risk of a loss of a particular kind b loss at a particular location c loss at a particular time.
If the insured does not comply with a term of this nature the insurer may not deny liability if the insured establishes that the non-compliance with the term did not increase the risk of the loss which actually occurred in the circumstances in which it occurred. Remedy for fraudulent claims. IA codified the recent case law on remedy for making a fraudulent claim that under section 12 of IA if the insured makes a fraudulent claim the insurer is not liable to pay the claim and the insurer may terminate the contract by notice to the insured with effect from the time of the fraudulent act.
IA introduced a separate section s. For more on these topics see under Insurable interest, Misrepresentation and non- disclosure and Warranties below. Insurance regulation in the UK has for the most part been concerned with the prevention of insurance insolvencies.
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There has traditionally been very little intervention in the contractual relationship between insurers and insured, and this has been left to voluntary mechanisms covering consumer contracts only such as the statements of insurance practice from the Association of British Insurers life and non-life, first adopted in and modified in and the Insurance Ombudsman Bureau set up on a voluntary basis in The Financial Services and Markets Act replaced all earlier insurance companies legislation and introduced regulation of the manner in which insurers deal with private insureds in particular.
With effect from 15 January the conduct of all classes of insurance business, with respect to both insurers and intermediaries, was regulated by the Financial Services Authority FSA.
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Changes in UK regulation of financial services. The FCA regulates all authorised firms for conduct of business issues. The provisions relating to the duty of good faith are mainly contained in chapter 8 of ICOBS, which deals in general terms with claims handling by insurers.
Rule 8. Other than where there is evidence of fraud, a rejection of a consumer's claim will be unreasonable if it is for:. For more detail on the regulatory changes see the separate fact files The regulatory framework , The regulation of general insurance and protection business and The regulation of retail investment business. Historically, the FSA introduced an initiative under which "contract certainty" is required of insurers. In December , expressing particular concern at the way contracts were concluded within the London insurance market without agreement on policy conditions, the regulator asked market leaders to come up with a market-led solution within two years.
The governing principles are that:. The Market Reform Contract which requires that detailed terms to be included in the insurance contract at the outset is now the standard form used in the London market for formation of insurance contracts. For more on this initiative see the fact file on London market reform. Financial Ombudsman Service. As before, the FOS may deal with cases on a basis of fairness rather than strict law - its statutory power is to determine complaints by reference to what is "fair and reasonable in all the circumstances".
The FOS will only investigate an issue after the policyholder has exhausted the insurer's internal complaints procedure and a final decision has been issued to the policyholder with which they are still dissatisfied.
If the consumer accepts the decision of an ombudsman, it becomes legally binding on both parties. It is not possible to appeal an ombudsman decision to another ombudsman. A decision of an ombudsman cannot be appealed on its merits in court. FOS can be "judicially reviewed" by the courts. But a judicial review will generally focus on the way in which an ombudsman has arrived at a decision, not on the individual facts and merits of the dispute itself. An insured who has accepted an FOS award cannot bring a court action for the balance of his losses.
The combined effect of these changes, together with the introduction of ICOBS, is that virtually all consumer disputes, and many small business disputes, are referred to the FOS, which has developed principles of its own in a wide range of situations. Only rarely will a consumer or small business dispute reach the courts, and that can only happen if the insured so wishes. The approach adopted by the FOS in determining these disputes has been influential in the Law Commission review of consumer insurance law as discussed above.
For further information on the FOS and general insurance see the separate fact file The Financial Ombudsman Service and general insurance. Unfair contract terms. The Unfair Terms in Consumer Contracts Regulations replacing an earlier version in are applicable to insurance contracts. These Regulations operate to strike down unfair terms in consumer contracts. They have to date been applied to prevent insurers from relying upon a claims condition precedent which would otherwise have defeated a claim automatically and without proof of prejudice, Bankers Insurance Co Ltd v South As stated above the Consumer Rights Act came into force in October The Act revoked the Regulations.
A trader cannot by a term of a consumer contract or by a consumer notice exclude or restrict liability for death or personal injury resulting from negligence. A term is unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties' rights and obligations under the contract, to the detriment of the consumer. Where a term is held to be unfair, the consequence is that it is not binding on the consumer but the contract continues, so far as practicable, to have effect in every other respect.
All insurance contracts must be supported by insurable interest, but the requirement varies from class to class. Life and personal accident policies must under the Life Assurance Act be supported by insurable interest at the outset, but not at the time of the loss as the insurance is not designed to provide an indemnity. For all other indemnity policies there must be actual or anticipated insurable interest at the outset failing which they are wagers and there must be insurable interest at the time of loss from an insured peril failing which the insured cannot prove that he has suffered any loss Meaning of "insurable interest".
There has been a gradual expansion in the concept of "insurable interest" especially for the reason of commercial convenience. The Court of Appeal in Feasey v Sun Life Assurance Corporation of Canada has held that the defence of lack of insurable interest should not defeat a legitimate commercial transaction. The Court of Appeal decided that the relationship between the syndicate and the employees was sufficiently close to give rise to an interest in their lives.
In so deciding the court approved a line of cases eg Petrofina UK Ltd v Magnaload Ltd  2 Lloyd's Law Rep 91 to the effect that a subcontractor has an insurable interest in the entirety of the works project even though he is contributing to only a small part of the project, on the basis that in the event of any casualty the subcontractor could be deprived of the benefit of his contract.