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INSURANCE LAW (DIP)

QUESTIONS & ANSWERS
By Farid Hegazy
General Manager of Risk Management Sector at
Misr Insurance

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 1
Distinguish between public law and private law name two branch of
each class.4/2000- 410/2004

Public law:
Is concerned with:

 The legal structure of the state and the relationships between the

state and the individual members of the community.

 It also governs the relationship between the one state and another.

Main branches are any two:

• Constitutional law, Administrative law and Criminal

law.
Private law: governs the relationships between individuals.
Main branches are any two:
• Law of contract;
• Law of torts;
• The law of trusts; the law of property
• The family law and
• The law of succession.

What is administrative law? Give three examples 4/2002

Administrative law:
It is often regarded as a branch of constitutional law.

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  It concerns the legal relationship between private
citizen and the various agencies of local and central
government, Examples:
 questions of local rating;
 taxation and compulsory acquisition of land;
 the powers of local boards and authorities in relation to
highways;
 health and education; and
The granting of licenses for various trades and professions.
=================
1A/ Constitutional law:
-----------------------------------
 Is concerned with the structure of the main institutions of
government and their relationship to each other,
 Including the relationship between the two houses of parliament
in the UK and between central and local government.
 It includes also the making of treaties with foreign states and the
status.

Function and powers of the Monarch,‫ الملكة‬members of parliament,

government ministers the judiciary, the civil service and the armed
forces

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 Criminal law:
-------------------
It is concerned with the control of behaviour, which harms or threatens
the peace and stability of the community.
This control is exercised by punishing person who commits serious
wrongs, which are likely to damage the interests of society as a whole
Crimes such as: theft or murder obviously affects individual victims,
but the stability of society as a whole will be threatened if they go
unchecked.

What is meant by the expression “the rule of law”? 4/2003

 Although the constitution of the United Kingdom is unwritten.

 It includes what has become known as the rule of law.
 Generally regarded as embracing the following principles:

 The powers exercised by

politicians and officials much have a proper foundation and be based
on an authority given to then by law.

 The law generally should be reasonably certain and predictable.

 People should be treated equally by the law, which should not

allow unfair discrimination.

 No one should be punished or deprived of their property.

 Every person should have a right of access to the courts, which

will defend the liberties and freedoms of the individual.

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 Briefly distinguish between common law and Equity as sources of
English law. Give two examples of principles or remedies, which
Equity has given to the legal system,

Common law:
- The Common law can refer to the unified system of law,
developed from the legal custom of the country.
- The Common law can refer to unwritten law as a whole.

- Refers to the system of rules developed and applied in what were

known as the common law courts.

Equity is: a supplementary system of

rules and principles
that were originally developed and applied in a separate court, the court
of chancery,

Principles or remedies which equity has given to the legal system:

 The law of trusts general.
 Specific performance: a court order compelling a person to
carry out a promise.
 Injunction: a court order compelling a person to do something or
prohibiting them from doing something.
There are various other examples of principles which drive from
equity including:
- Promissory estoppel. ‫الوفاء بالوعد‬
- Subrogation; and
- Contribution.
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 List and briefly describe:

a) Two major source of English law.

b) Two minor source of English law. 10/2003/14/2004 –
10/2004
a) there are two major sources of English law:
 legislation; and
 judicial precedent or (case law)
b) Minor source of English law.
 Local custom;
 Legal books ;
 Treaties and European community law.

Distinguish between public act and private act of parliament. Give

an example 10/2001- 10/2004

Public act: Is one, which contains law affecting the whole community,
usually introduced via a Government Bill. Such as the (Theft Acts)

Private act: Is passed for the benefit of a particular individual,

organisations or group. Often promoted by a local authority.
Examples: Lloyd’s act 1982 and insurance brokers (registration) act
1977

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 Distinguish between a consolidating act and a codifying act. Give
one example of each 2000/4

Codifying act
• Re-enacts all current legislation on a particular topic and embodies
case law principles also.
• Thus creating a comprehensive statement of the law on a particular
subject.
There are a number of examples in commercial law including:
 The Marine Insurance Act 1906.
 The Sale of Goods Act 1979
 The partnership Act 18990
 The Bills of Exchanges act 1882

Consolidating act:
Is one, which repeals all previous legislation on a subject and reenacts,
in one legislation-arranged statute in one new statute.
Two examples of consolidating acts are:
• The National Insurance act 1965.

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• Rood traffic act 1988

Briefly describe the legal function of law commission? 4/2001

 The law commission which was established by the Law

Commission Act 1965
 The law commission is responsible for the
consolidation and revision of English law.
 And reviewing English law as a whole.
 It can be updated, simplified and developed in a
systematic way.

In relation to interpretation of documents

what is the literal
rule? Give an example drawn from ins. Case law. 4/2004

The judges have a number of aids to interpretation, which can be

classified as either statutory aids or common law rules.
D2/a / statutory aids:
==============
First:

The interpretation act 1978 lay down certain rules of

interpretation, which apply to statute law generally
Words used in the singular are deemed to include the plural and

vice versa.
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 The use of the masculine includes the feminine and vice versa ,

and

 The term person is deemed to include artificial entities such as

companies as well as human beings.

These general rules may be overridden in the express provision of

a particular act

Second:
Acts of parliament often
contain an interpretation section

in which important worlds and phrases are given a precise definition

Finally:

Acts of parliament have a preamble or long title setting

out the general scope and purpose.

Common law rules:

==================
These are rules which the court themselves have develop to assist
with interpretation.

They include the following:

 Literal rule
=============

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  This primary rule takes precedence over the other.
 According to the rule words and phrases should be construed
by the courts the their ordinary sense.
 The ordinary rules of grammar and punctuation should be
applied
 The courts will not try to establish whether this represents
what parliament intended when the legislation was passed.
This rule is strongly criticised by many lawyers.
There are two subsidiary principle rules:

- A word must be determined by its context

- the ejusdem generis rule : the meaning of any general
term depends on specific words which precede it
whitely v. chappel (1869)

In relation to the interpretation of documents what is the literal

Rule? Give an example drawn from insurance case Law? 4/2004

Golden rule: ==========

Where the meaning

of words in a statute. If
strictly applied

Would lead to an absurd

There is on alternative interpretation which avoids the
absurdity

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 The courts are entitled to choose that latter and assume that

parliament did not intend the absurdity. This is sometimes

called the golden rule.

For example: the offence against the person act 1861 provide that:
Whosoever being married shall marry another person during the
life ---the former husband or wife is guilty of bigamy .

Mischief rule:
============

Under this rule the judge will consider the meaning of the
words in the act in the light of the abuse or mischief which the
act was intended to correct.
And choose the interpretation, which makes the act effective in
suppressing this mischief.
For example: the street offences act 1959
There are a number of presumptions, which apply to the
construction of a statute.
Amongst the most important are the presumption that the statute:
 Is not intended to create a strict offence.
 Is not intended to oust the jurisdiction of the courts.
 Is not intended to have retrospective effect.
 Is not intended to infringe the requirements of international
law.
 Applies only to the UK
 It is not intended to interfere with vested.
 Does not bind the crown.

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 Distinguish between primary legislation and delegated legislation.
Give three examples of the latter. 10/2003—4/2004

Primary legislation:
 It is law, which has been created in a formal way.
 And set down in writing.
 In England: the only body which, has power to make general
legal rules in this way is parliament.
 The parliament consists of :
• The House of commons,
• The House of lords and The Monarch.
 Sometimes parliament delegates (i.e.

transfer ) its law- making power to lesser‫اقل‬

bodies such as :
 Government ministries and, 
Local authorities.
The principal from which parliamentary legislation takes is Act of
parliament or statutes so legislation is sometimes called statute law.

Delegated legislation:
==================
 Parliament obviously does not have the time to lay down all the
intricate rules, which are necessary in the field of.

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 For this reasons acts of parliament often lay down only a general
framework of rules.
 Acts of parliament often confer on person or body (particularly
government ministers) the power to make rules and regulations for
specified purposes.
 Acts which confer such power are called Enabling Acts ( or parent
acts )
 rules made under the authority of these acts are known as delegated
or subordinate legislation
The most important forms or main types of delegated:
 Statutory instruments ‫وسائل قانونية‬
 Orders in council ‫ مرسوم ملكي‬ Bye- law ‫قوانين‬
‫فرعية‬

 There is much delegated because parliament goes not have the time or
technical skills to deal with the precise details of all legislation it wishes
to pass.
Delegated legislation is more flexible than primary legislation and can
be brought into effect more speedily

Distinguish between binding precedents and persuasive

precedents. Give two examples of persuasive precedent 4/2001

Binding precedents are decisions embodying legal principles that

must be followed by an inferior court,

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 Persuasive precedents may influence the decision of a court to a
greater or lesser extent but are not strictly binding.
Examples are any two:
• decisions of lower courts or those of equal rank;
• Obiter dicta;
• Foreign judgements; Textbooks etc.

Name the three divisions of the High court. State the types of cases
handled in each. 10/2002

i. The chancery division deals amongst other thins with:

 Company matters/ partnerships/ trusts/ mortgages. And revenue
matters.

ii. The family division handles:

 Matters of family law including disputes about family property
and,
 Matters concerning children such as adopting and guardianship.

iii. The queen’s Bench division:

 It includes a commercial law court and admiralty court (
shipping )
 And has jurisdiction over every type of common law civil
action.
 Contract and torts.

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 List:

a) the four main institutions of the European Communities;

b) Four sources of European Community law.10/2002

 the four main institutions of the European Communities are

:
 The council of the European communities.
 The commission of the European community;
 The European parliament;
 The European court of justice.

Sources of European Community law include:

• The treaties;
• Regulations;
• Directives;
• Decisions;
• Recommendations; Opinions.

In the context of European law

distinguish between regulations and directives. Give two examples
of directives, which are of immediate relevance to insurance.
10/2000

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 Regulations are:
Laws made by the council or commission, which have general
application.

They are automatically binding in their entirety on all members’ states

without any action by national governments or legislatures and for this
reason are sometimes described as self-enacting.
Directives of the council or commission are:
• Binding on member states to which they are addressed (normally
to all member states ) as to the result which is to be achieved.
• However, the method of implementing the law contained in the
directive is left to each member state.
• In the UK of parliament or delegated legislation of some sort.

Examples of directives directly relevant to insurance:

 Insurance Company accounts.
 Compulsory winding-up of insurance companies.
 Motor insurance.
 Tourist assistance.
 Credit and suretyship.
 Legal expenses insurance.

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 Duane Steals Wayne’s car sells it and spends the money. He is
convicted of theft in the Crown court.

a) If Duane appeals which court will hear the case?

b) If Duane loses his appeal what further rights of appeal
does he have if any?

c) If Wayne sues Duane in a

civil case for the loss of his car
what tort will he allege?
d) What court will hear the civil case? 10/2000

a) Court of Appeal (criminal Division).

b) House of Lord ( on a point of law only)
c) Trespass to goods / conversion.
d) Small claims court, county court or high court.

Una Steals duenna’s bicycle sells it and spends the money. She is

convicted of theft in the magistrate’s court.

a) If Una appeals which court will hear the case?

b) If Una loses hrs appeal what further rights of appeal does she
have if any?

c) If duenna sues Una in a civil

case for the loss of her bicycle what
tort will she allege?

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e) Which court will hear the civil case? 10/2003

a) Name four English courts having jurisdiction in civil cases listing

them in order of superiority within the court hierarchy.

b) What is ‘leapfrog” appeal?

a)
- House of Lords ( most superior within the court hierarchy); -
Court of Appeal (civil
Division);
- High court;
- County court (or Magistrates court).

b) In some circumstances an appeal from the High court can be taken

directly to the House of Lords missing out the court of
Appeal. This is known as a leapfrog” appeal.

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 What conditions must be fulfilled for a local custom to be recognised
by the courts as legally binding? 10/2000

Conditions are:
 Immemorial existence;
 Continuity;
 Reasonableness;
 Certainty;
 Peaceful user;
 Compulsion;
 Not contrary to statute.

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 2
a) Distinguish between a natural legal person and a corporation.
b) To what extent can a corporation:

- Enter into a contract;

- Commit a crime;
- Commit a tort. 10/2001

A natural legal person:

 Is a human being, whose legal rights and duties generally begin at

birth and end on death.

 Some natural legal persons have a special legal status or limited

legal capacity.

Corporations: or juristic person, are non-human legal entities, such as

registered companies.

b)
 Corporations can Enter into a contract: (always via a human
agent) but are usually subject to the ultra vires rule.
 Corporations can Commit most crimes:
Except humane crimes such as rape or bigamy. Obviously the range of
punishments available for a corporation is limited (effectively) to
fines).

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 Corporations can commit torts in the same way as they can commit
crimes and are subject to similar limitations (e.g. in respect of torts
requiring malice or other personal motive).

A-3 /Minors:

• The family law reform act 1969 ‫قاانون اصالا‬reduced the age of majority
from 21 to 18 years.
• Which the person under that age 18 years is infant ‫ قاالار‬or minor
In the law of torts: ‫ األذى‬/ ‫قانون الضرر‬
- Minors are usually fully responsible for their acts, -
in the property law:
Is concerned a minor may own personal property.
For the purposes of the criminal law minor divide into three classes
 Full criminal responsibility applies in the case of minors over the
age of 14.
 There is a presumption ‫افت ارا‬that minor aged 10-14 are incapable

criminal intent ‫ عمااد‬/ ‫قصااد‬, but this presumption can be rebutted.

 Children under the age of 10 are presumed incapable of committing
a crime and this presumption can not be rebutted.

Various other special rules also

apply to minors:
 A minor can not vote at elections and must be 21 before they can
take a seat in parliament. Or on the council of a local authority.

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  Can not marry under the age of 16 or marry without consent
‫موافقة‬under the age of 18.
 A minor may not sit on a jury ‫المحلفو‬

 A minor can not make a valid will ‫ والاية رارعية‬unless they are a
member of the armed services.
 Minors involved is civil litigation must sue ‫يقاضاي‬through a next

friend, i.e. an adult who is primarily ‫ فاي المقاام األو‬responsible for

any costs awarded against the minor.

A/4 persons of unsound mind:

- each branch of law has its own rules relating to persons who
suffer from mental disability ‫ إعاقة ذهنية‬and also its own definition of
(unsoundness of mind)
- Like minors, persons of unsound mind are generally responsible
for their own torts.
- A mental patient ‫ الماري الققالي‬would not be liable for actions were

involuntary ‫ ال إرادي‬/‫بدو قصد‬

- The rights of a person of unsound mind to transfer property or
make a will ‫والاية‬may be restricted with in the chancery division
of the high court there is a court of protection, this was
established for the protection and management of the property of
persons under the disability.
- The court may appoint a receiver who may be given such duties
and powers as the judge thinks fit.
- The receiver is usually a near relative of the mental patient.

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 The rules are as follows: (criminal law)

* Every defendant ‫ المدعي علي‬is presumed sane‫ سليا الققل‬the contrary is

proved the burden ‫ عبء‬of proof of insanity ‫ جنو‬rests upon the defence
To establish a defence on the ground of insanity it must be clearly
proved that at the time of committing the act.
The party accused ‫ ياتما‬was labouring under such a defect of reason ‫سابب‬
‫القجا‬from disease of the mind ‫ مار الققال‬, as not to know the nature and
quality of the act they were doing. Or if they did know it, that they did
not know they were doing what was wrong.

Corporations or juristic person: are

==========================
Non human legal entities such as registered for this reason sometimes
known as artificial legal persons.

There are two types of corporations:

Corporations sole:

Is legal person representing an official position which, will be occupied

by a series different people for example the Queen in her public capacity.

A Corporation aggregate is:

 A legal person consisting of a number of people in contrast to a

corporation sole (such as the Crown) which consists of one only.

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 Membership may change constantly but the corporation itself does
not.

Examples include the following.

• Chartered corporations- formed by royal charter.

• Statutory corporations – formed by private Act of parliament.
Registered corporations – formed by registration under the
companies acts.
Effects of incorporation:
================================
There are various effects of a
company being incorporated
including the following:
A separate legal personality:

- Quite distinct from that of members or shareholders.

- The leading case: salomon v. salomon (1897) Salomon

who manufactured boots.
• He formed his business into a company in which he held 20000
shares and six members of his family one share each.
• He advanced a loan to the company secured on its assets.
• And when the company encountered financial difficult.
• The law therefore treated him as an entirely separate a person
from the company even though he completely dominated.

A court may prevent a person from evading his responsibilities by using a

company as a front.

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 GILFORD MOTOR CO. V. HORNE (1933)
Horne worked for Gilford.
• And his contract of employment contained a clause, which
prevented him from approaching Gilford’s clients.
• And persuading them to transfer their custom to any business
which Horne might start himself.
• Horne left Gilford and set up a similar business as a registered
company.
• And he then sent circulars tro Gilford’s customers inviting them
to transfer their business to him
• Horne argued that :
The clause in
his employment contract applied to him personally but not his
company.

• This argument was rejected and Gilford B/5 Dissolution of

companies:
======================
 A company can be dissolved (i.e. liquidated or wound up ‫)تصافية‬
compulsorily, voluntarily ‫ اختياري‬or under the supervision of the
court.
 Compulsory winding up is usually the equivalent of the
bankruptcy of an individual,
 Voluntary winding up is the result of a resolution of the
shareholders,
 Whichever methods is used a liquidator is appointed.

 The function of the liquidator is to realise ‫يادر‬all the company’s

assets and ensure that all liabilities are met.

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 C/ UN incorporated associations:
==========================
 Are groups of people which have not been incorporated by any of
the methods described above.
 Are not general treated as separate legal entities but simply as
groups of individuals.
 They include not only ----- and voluntary groups put also special
examples, such as partnerships and trade unions,

C1/ CONTRACT:

 A member who makes a

Contract on behalf of a club,
 Is usually personally liable on the contract

 The other members of the club will be liable only if they

authorise the making of the contract.
C/2 TORT: ‫الضرر‬
==============

Members are generally liable for their own torts.

C/4 PROPERTY:
===============
If a club is dissolved for any reason, and whether or not its
property is held in trust, The club property will be divided
amongst the Members in this way.

C/4 / RIGHTS OF MEMBERS:

=======================
• The rights of members Generally depend upon the rules of the club.

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• Every member is considered to be in a contractual relationship
governed by the rules with every other member.

There are two special types of unincorporated association:

Partnerships.
Trade unions.

How is a partnership defined in English law? How is it formed and

what is its maximum membership? 2001/4 10//2000

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  The relationship which subsists between persons carrying on
a business in common with a view to profit (partnership act 1890)

 There are no specific formal requirements so a partnership

may be formed by oral agreement or be implied.

 In practice there is usually a written agreement or a

partnership deed.

 The maximum membership is 20 in the case of most

partnerships.

 Exceptions are solicitors and accountants.

 In the case of a limited partnership at least one must be a

general partner.

An undischarged bankrupt loses certain legal rights under English

law? Give four examples of such rights. 10/2002

An undischarged bankrupt can not (any four)

• Sit in either house of parliament;

• Be a member of a local authority council;

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• Act as a magistrate ;
• Act as a company director or participate in the management of a
company without the permission of the court;
• Obtain credit over a certain figure without declaring that he is
undischarged bankrupt.

What is the purpose of the memorandum of association of a

company? Name five clauses that the memorandum must contain.
4/2000

The memorandum of association: is

 A document which must be filed with the Registrar of

Companies.

 It enables people to identify a company and know its nature and

general purpose.

Mandatory clauses include (any five):

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  The name clause;
 Registered office clause;
 Objects clause;
 Limitation of liability clause;
 Guarantee clause (in appropriate cases).
 Capital clause;
 Association clause;  Subscription.

What is meant by the Crown in legal terms? What persons and

organisations make up the crown? 10/2000 10/2003

The Crown is:

A legal entity which, for most purpose is more or less equivalent to

the Government.
However , the Crown also includes the reigning Monarch who has
both a private capacity as a natural legal person and an official
capacity as part of the Crown
The crown consists of the reigning Monarch Government
Ministers, central Government Departments and their staffs of civil
servants , the privy council and the armed forces ( but not the
police who are not Crown servants).

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 What is a corporation aggregate? Name three types of corporation
aggregate and briefly how each type is formed. 4/2002 –10/2004

A Corporation aggregate is:

 A legal person consisting of a number of people in contrast to a

corporation sole (such as the Crown) which consists of one only.

 Membership may change constantly but the corporation itself does

not.

Examples include the following.

• Chartered corporations- formed by royal charter.

• Statutory corporations – formed by private Act of parliament.
• Registered corporations – formed by registration under the
companies acts.

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Anna and Beatrice wish to set up an insurance broken firm. They
have to choose between:
a) Forming a partnership;
b) Setting up a registered company to run the
business.
Briefly outline the process that would have to be followed in each
case. Ignore any special legislation governing insurance firms,
10/2003

==================================================
3
==================================================

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 a) Outline the three main forms that the tort of
trespass may take.
b) If a person is sued for trespass will he normally
be able to claim an indemnity from his liability
insurance? Give a reason for your answer.4/2003
A)
Trespass takes various forms but all forms have the following
characteristics:

 The act of the defendant must be direct.

 The act of the defendant must be intentional.

 The tort is actionable per se

Trespass takes three main forms:

 Trespass to person, such as (Assault ‫و‬Battery and False

imprisonment( .
 Trespass to goods, such as (taking goods from the possession of
another they can be sued for (conversion) - moving them from
one place to another, throwing things at them or meddling with
them in some other way. Example Heyden v. smith 1610

 Trespass to land: such as (

- Unlawful entry onto the land of another;
- Unlawfully remaining on the land of another;
- Unlawfully placing or

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 throwing any material object upon the
land of another.

Give two example of each of the following:

a) intentional torts;
b) torts requiring fault;

c) Strict liabilities in tort; 4/2003

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 Distinguish between a crime and a tort. Give two examples of
circumstances in which a wrongful act may amount to both a crime
and a tort? 4/2003

Torts and crimes:

=====================
- The law of torts is part of the civil law.
- The purpose of an action in tort is :
To Provide compensation or
reparation for the victim who
has harmed by the tortious.
Actions in tort are brought by the victim themselves (the plaintiff).

On the other hand:

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 • A crime is a wrong which, is harmful ‫ ما ذ‬/ ‫ضاار‬to the interests

of society as a whole and

• The object of criminal proceedings is to punish ‫يقاقااب‬

Offenders ‫ا‬who are found guilty ‫مذنب‬
• Whereas criminal prosecutions are more commonly brought
in the name of the Crown by the policy in the UK or a public
prosecutor.

For example:
-----------------
• If A steals B’s coat there is a crime (theft) and a tort
(trespass to goods and conversion also.

• If A physically attacks B there is a crime (assault in some

form and a tort (trespass to the person.

• If A careless by drives into B’s car there may be a crime

(driving without due care) and a tort (negligence)

A/2 – Tort and breach of contract:

=======================
====
 A tort is a breach of duty fixed by law.

 In the law of contract: the duties are fixed by the parties

themselves and set out in the contract.
For example:

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  Under an insurance contract the insured has a duty to pay the
premium and the insurers have a duty to pay claims.

These are not general duties, but duties which arise voluntarily / ‫طو‬

‫اختياري عا‬by agreement.

 If B hires a taxi and is injured as a result of careless driving by

taxi driver A.
- They may be able to sue A for breach of the contract as a
contractual duty to drive carefully is implied in the agreement to
hire the taxi and the tort of negligence.

B) Example of torts requiring fault:

C) Example of Strict liabilities in tort:

Common law examples include the rule in Rylands v, Fletcher the
law relating to straying livestock and some other animals and the law
on innkeepers (|both of the latter having been tidied up in statute law).
Examples under statute include the Consumer Protection Act 1987
(product liability in tort) and many examples in health and safety law
(e.g. old Factories Acts section 14(1) –fencing of dangerous
machinery).

| P a g e 37
A) What three things must a claimant prove for a action in the tort of
negligence to succeed: 4/2003

For a action in the tort of negligence to succeed There

are three essentials:

 A duty of care owed by the defendant to the plaintiff;

 A breach of that duty by the defendant;

 Damage suffered by the plaintiff as a result of the breach.

‫مما‬

What is the rule in Rylands v. fletcher (1868) name four defences no

liability under the rule. 4/2000-

| P a g e 38
 This is a rule of strict liability which Blackburn J explained as
follows:

‘ A person who, for his own purposes brings onto his land and collects
and keeps there anything likely to cause mischief if it escapes, must keep
it in at his peril. And if he does not do so is prima facie liable for the
damage which is a natural consequence of its escape’.

Defences are:

 consent of the plaintiff;

 Act of god;

 Unexpected act of stranger;  Statutory authority.

What is the rule in Rylands v. fletcher (1868)? How did the case of
cambridge water company v. Eastern counties leather (1994) affect
this rule? 4/2003

• Rule in Rylands v. fletcher (1868) 000000

• the case of Cambridge water company v. Eastern counties

leather (1994) affect this rule

- House of Lords held that : the defendants were not liable under the
Rylands rule for the escape of toxic substances from an old tannery

| P a g e 39
- Because the damage (pollution of underground water resources) was
not of a type which could reasonably have been foreseen.

In the law of torts what is meant by remoteness of damage? Your

answer with decided cases. 10/2001

 Damages in tort will not be awarded for loss or injury that is too

remote from the original wrongful act.

 The original test for remoteness was causation, now it is

foreseeable i.e. the damage must be of type that is reasonably
foreseeable for compensation to be recoverable.

 Relevant cases include polemis and the wagon mound

| P a g e 40
What five requirements must be satisfied for action for the tort of
breach of statutory duty to succeed? 10/2001 4/2004

 The statute must be intended by parliament to allow a civil

remedy.

 The statute must impose a duty on the defendant and not merely

a power.

 The plaintiff must prove that the statutory duty was owed to him.

 There must be a breach of duty by the defendant.

 The damage suffered by the plaintiff must be caused by the

breach and be of a kind which was contemplated by the statute.

| P a g e 41
 What is meant by malice in the context of the law of torts?

Give two examples of

circumstances in which malice
may be relevant in tort. Support one example with a decided case.
10/2002

In the context of the law of torts, malice means not just personal
spite or ill will but any motive or reason for an act that the law regards
as improper.

Malice is tort usually relevant in tort, however:

• It is an essential ingredient in one or two minor torts (e.g. malicious
prosecution and malicious falsehood) ;
• In the tort of defamation certain defences are not available if there is
malice ;
• In the context of nuisance actions which would otherwise be
reasonable may be deemed unreasonable if they are actuated by
malice.

Hollywood silver fox farm v enunett (1936) supports the third point.

| P a g e 42
 Explain briefly the main provisions of One of the followin statutes.
a) The Limitation Act 1980. 10/2001

 The law allows a person who

is the victim of a civil wrong only a limited
period of time.

 In which to begin their action against the wrongdoer.

 These generally run from the date when the cause of action
accrued (e.g. the date when damage occurred in the case of tort
action or the date of the breach of contract) Key limitation
periods are :
• Three years for personal injury claims (tort or breach of
contract)
• Six years for property damage in tort and contractual claims
generally;
• Twelve years for action on a deed.

Briefly explain the Hedley Byrne rule and comment on its effect in the
law of torts. 10/2002

| P a g e 43
 Originally there was no liability in tort for negligent words or

negligent advice only for negligent acts.

 Liability for negligent advice could arise only where there was a
contract between the parties.

 This meant that professional people who, gave bad advice could

be sued only by their clients.

 Who would have a contractual relationship with them.

 They would not be liable to other people who suffered loss as a

result.

 The law was changed by the decision of the House of Lords

in Hedley Byrne v. Heller and partners (1963).

 This case established for the first time that liability could arise in

tort for negligent misstatement.

 It established also a new category of liability in tort for pure

economic loss.

Liability under the Hedley Byrne rule arises where:

• There is a special relationship between the parties (but not a
contract)

| P a g e 44
• The giver of the advice can reasonably foresee that the advice is
likely to be acted upon and that the recipient is likely to suffer if
it is inaccurate.
• The advice is in fact acted upon causing loss to the plaintiff.

In the context of law of torts, distinish between special damaes and

general damages. Give an example of each. 10/2000 10/2004

Special damages are:

| P a g e 45
 Those of which the plaintiff is required to give notice when he
makes his claim against the defendant and which he must prove
strictly at trial.

 Examples ( arising, say, from injuries received in a car accident)

might include loss of earnings damage to clothing and medical
expenses.
General damages:

 Do not require such strict

pleading and proof because they relate to losses which the law
automatically presumes to result from the tort

 For example, pain and suffering following an injury.

 The term special damages is also used to describe damages

which are capable of precise financial assessment as distinct
from general damages, which can not be precisely quantified but
only assessed on the basis of what a reasonable man would deem
appropriate to compensate for the loss.

Distinguish between the torts of libel and slander. Explain briefly

into which category a defamatory television broadcast falls. 10/2000

‫مهم‬

| P a g e 46
 The tort of defamation takes two forms, which are libel and

slander.

 Where defamatory statement is in a permanent from the tort

takes the form of libel

 Where the statement is in a transient (non-permanent) from the

tort is slander.

 Libel may be a crime if it is sufficiently serious.

 Slander in itself, is a civil wrong only (althogh spoken words

may constitute another crime such as blasphemy – sedition).

 Slander is not generally

actionable per se and damage must be proved except four
cases, where damage is assumed to have occurred.

 A defamatory radio or television broadcast is libel (Defamation

Act 1952) as i.g. defamatory theatrical performance.

Distinguish between liquidated and unliquidated damages. In each

case give an example of circumstances - 4/2002

| P a g e 47
 The term liquidated
• Damages refers to financial compensation that is fixed in
advance of a wrong being committed.
• Can arise in contract ,where the parties agree in advance what
comensation shall be payable for particular breach of contract
• Liquidated damages clauses are valid provided they are
reasonable.

unliquidated damages
• Refers to financial
compensation that is not fixed in advance of any wrong being
committed but after the event, normally being set by the court
which hears the dispute.
• An award of unliquidated damages is the standard (common law)
remedy in tort.

What three duties are imposed upon an employer at common law?

What is the effect of the Health and safety at work act 1974 in
relation to these duties? 4/2000- 10/2003
The duties are:

 To select compensation staff;

| P a g e 48
 To provide and maintain proper plant, premises and equipment;

 To provide a safe system of work.

- The 1974 Act takes these common law duties and makes them
subject to the criminal as opposed to the civil law.
- Wrongdoers may be subject to unlimited fines and/or imprisonment
of up to two years.

In relation to tort claims for nervous shock distinguish between

primary victims and secondary victims. What conditions must be
satisfied for a secondary victim to have a valid claim in law? 10/2003

 primary victims:
• Persons who suffer shock through fear for their own safety.
• This category of plaintiff was the first to be recognised by
English law.
• The first English case was Dulieu v.White (1901)

| P a g e 49
 secondary victims
• Persons who suffer shock through fear for the safety of others.
• As the twentieth century progressed the law came to recognise
claims by persons who suffered shock through fear for the safety of
persons other than themselves.
• The first case was Hambrook v. Stokes Brose (1925)
• As a mother suffered shock on witnessing a driverless lorry career
down the road in the direction of her children.
Conditions must be satisfied for a
secondary victim to have a valid claim
in law :

The court held that should not be entitled to damages unless they could
also establish proximity in terms of:
• Their relationship with the immediate victim: this had to be
characterised by a close tie of love and affection.
• Their closeness in space or time to the incident or its immediate
aftermath; and
• The means by which they learned about the accident which had to
be through their own unaided senses.

| P a g e 50
 What is meant by strict liability in the context of the law of torts?
State and briefly outline one example of strict liability in tort under
common law and one example of strict liability under statute.4/2002
Strict liability in tort is:
Liability that can arise even in the absence of intent or negligence on
the part of the alleged wrongdoer.
The taking of reasonable care is not a defence though other defences
may be available.
Common law examples include the rule in Rylands v, Fletcher the
law relating to straying livestock and some other animals and the law
on innkeepers (|both of the latter having been tidied up in statute law).
Examples under statute include the Consumer Protection Act 1987
(product liability in tort) and many examples in health and safety law
(e.g. old Factories Acts section 14(1) –fencing of dangerous
machinery).

| P a g e 51
 Describe the two forms that
private nuisance may take. Give
two examples of each form.4/2001
Private nuisance can take the forms:

 the escape of noxious things from defendant’s land 

or interference with servitudes (rights attaching to land)
Noxious things that might escape include (any two)
 smoke;
 smells;
 gas;
 Noise, etc. servitudes
• rights of way;
• rights of support to land; Water rights
etc.

| P a g e 52
 Outline the principle of law
illustrated by one of the follow

cases: overseas tankship (UK) LTD v. mort’s dock and

Engineering co. LTD 1961

 The law attempts to place reasonable limit on a defendant’s

responsibilities by releasing him from liability where the damage is
too remote.

 Originally the test for remoteness of damage was based purely on

causation.(see the polemis 1921) .

 This principle was rejected by the privy council in the wagon

mound (the name of the ship invlved)

 The case established a new test based on foreseeabilities : damage

would be too remote if it was of a type which was not reasonably
foreseeable.

 The wagon mound an Australia case and therefore not strictly

binding in English law, it has however been ----------- in subsequent
decision.

| P a g e 53
 D/5 / economic (of Financial) Loss: ‫مهم‬
=======================
============
• A negligent act which, causes physical damage may cause
economic also.
For example: if a contractor negligently set fire to a factory the result
may be physical damage to the premises together with economic loss
in the form or production lost.

• Where economic or financial loss accompanies physical damage

and results directly from it the defendant is liable for such loss.
• Provided the economic loss is not too remote.
• However the courts have been reluctant to allow claims in tort
for pure economic loss (I,e claims for financial loss which is
not accompanied by any physical damage to the plaintiff or
their property.

Case: for example: Weller v. Foot and Mouth disease.

 The defendants negligently allowed germs to escape from their

laboratory------------ an outbreak of foot and mouth disease in the
district.

| P a g e 54
 To prevent the disease spreading movement of cattle was
restricted and the plaintiffs who were auctioneer lost a great deal
of business when auction sales were banned.

 The court held that: no duty of care was owed to the plaintiff
for their loss of profit, which was a pure financial loss.

 Only the cattle owners who suffered physical damage the

their property could recover.

-----------------------------------------
---------------
Case 2: Spartan steel and Alloys v. martin and co. contractors ltd
1973.

 The defendant’s negligently cut through a cable carrying

electricity to the plaintiff’s factory.

 Interrupting the power supplying for 14 ½ hours.

 Metal in the plaintiff’s furnaces was damage’s reducing its value

by 368.

 The plaintiffs also claimed for 400 profit they would have made
on this melt and a further 1767 for profit on four further melts
which they would have completed in the time that the electricity
was cut.

| P a g e 55
 The court held that :
• They could recover only the loss in value of the metal actually in
furnaces and the profit on that metal 768 (368+400)
• The rest of the loss was a pure financial loss which was not which
the firm had suffered.

Psychiatric illness:
===============
Who can sue in negligence for psychiatric illness?
=========================================

 The first point to make is that a person who suffered bodily

injury will always be allowed to recover damages for any
psychiatric harm that accompanies it.

 There are no special rules.

 Claims for Psychiatric illness are subject to the general principle

of the law off negligence including the usual requirement of
foreseeability.

 Only those plaintiff who suffer a recognisable psychiatric illness

will succeed

Successful plaintiffs are likely to fall in one or two board

categories.

| P a g e 56
• Those who suffer psychiatric illness as a consequence of an
accident caused by the negligence of another.
• Those who suffer psychiatric illness by some other means.

In the law of negligence what is meant of duty ?how do the court

decide whether or not a breach has occurred? 4/2004

Breach of duty:
============

| P a g e 57
 A breach of duty occurs when the defendant fails to do what a

reasonable man or does what a resonable man would not have done.

 We can say that a breach of duty occurs when the defendant fails to

take reasonable precautions.

The courts take into account a number of factors in examining the

question including:.
• The magnitude of the risk involved in the defendant’s activities.

• The ease with which the risk could have been eliminated or
reduced.

• The current state of scientific or technical knowledge.

Alcock v. chief constable of south yorkshire police (1992)

 An appeal that arise from litigation surrounding the 1989

Hillsborough football staduim disaster ‫كارثة‬

 The soush yorkshire police who were reasponsible for policing

the match.

 Negligently allowed an excessive number of football supporters

to enter the ground with the result that 96 people were curshed to
death and many more were injured.

| P a g e 58
 The cases as sixteen plantiffs they themselves has not suffered

bodling injury and nor had they been at risk.

 But they has suffered psychiatric injury through witnessing the

plight of other.

 The house of lords held that:

In cases such as this foreseeability alon was not a sufficient test of

liability.

The court held that secondary victims such as these should not be
entitled to damages unless they could --- establish.

Public nuisance:
=============
Has been defined as:
‘’ The carrying on of an activity which is likely to cause
inconvenience to the public or a section of public or
interference with a right common at all.’’ For example:
- Could arise from toxic fums from a factory engulf who nighbourhood.
| P a g e 59
- Or if noise from nightclub jeeps the whole local community awake.
Public nuiasance is treated as a crime.

Castle v. st Augustiness link (1922)

 Where a taxi driver was injured when on the road by a golf ball

driven from the 13th tee of the defendant’s golf cours owing to

the position of the tee.

 Balls were frequently driven

into the road this created amount to public
nuisance.

 The plaintiff could sue because being injury he had suffered

special damage.

 Actions in nuisance will generally succeed only where there is a

element of repetition in the interference or continuous.

Defences and remedies:

====================
a special defence in nuisance is:

Available under the prescription Act 1832.

This principle was clarified in sturges v. bridgman 1879.

| P a g e 60
 The defendant a confectioner had operated noisy machianry in

connection with his business for well over 20 years.

 The plaintiff a doctor had built a new consulting room next to

the confectioner’s premise and found that the noise interfered with his
work.

 He succeeded in an action for nuisance as the noise had not

created an actionable nuisance.

Vicarious liability:
===============

• Liability is said to be vicarious when one person is held liable

for wrongs committed by another.

• Vicarious liability is therfore not torts or a wrong in itself but a

way which liability may be imposed,

• A person may be directly liable for their own torts or.

• Vicariously liable for torts committed by others.
• Arises from the relationship of master and servant (employer and
employee) .

| P a g e 61
 • An employer is vicariously liable for the torts committed by an
employee in the course of their employment
Consumer protection Act 1987 ========================
Under this Act:
- a producer is liable for personal injury or damage in excess of
275
- the producer is defined as:
‘ The manufacturer or the person who has won or abstracted materials
or who has processed material.

Essentials of Defamation:
=====================
For an action in defamation to succeed the following elements must be
present:

 a defamatory statement { cassidy v. –aily mirror newspaper

ltd(1929)}

 Reference to the plaintiff.

 Publication ( of the defamatory statement)

 Damage (in cases of slander not actionable per se ) .

Defences:. ========

| P a g e 62
 a number of special defences are available in the tort of defamation
include the followin:

 Justification: where the alleged defamation arises from a

factual statement.

 Fair comment.  Privilege.  Innocent defamation

To public a suitable correction and apology,
To take reasonable steps to notify persons.

General defence in tort:

====================

there are a number of general defences that is defences which apply to

more ----- one tort as follows:

selef defence:
--------------------
- the law allow people to use reasonable free to defend
themselves ,their property and other person.
- Reasonable -------- can also use to prevent a crime.
- Is a good defence to intentional torts.

Necessity:
----------------

| P a g e 63
 statutory authority
--------------------------
Act of god
---------------
Consent and volenti non fit injuria
-------------------------------------------------

Contributory negligence.
---------------------------------

Remedies in tort:
==============
1) Damages:

 Special damages.

 General damages.

 Exemplary or (punitive) damages ‫تقوي تأديبي‬

The object of an award of damages is not pe punish the wrongdoers

but to compensate the plaintiff punishment being a function.

| P a g e 64
 nominal damages :
• Where a person has committed a tort which is actionable per se.
• The court may award a nominal (i.e.) taken sum to mark the fact
that the defendant was in the wrong.

 Contemptuous damages.
• This is award of a tiny sum to mark the courts low opinion of the
claim of the plaintiff or record their disapproved of the plaintiff
conduct.

• Contemptuous damages may be awarded for any tort whether

actionable per se or not.

2) Injunction:
===========

• in some cases an award of damages will be inappropriate.

• In many cases the plaintiff’s main wish will be to prevent -------
------ the commission of a tort.

• In all these cases an injunction will be appropriate.

• An injunction is a court order commanding the defendant to do a
particular this such as :
 Kock down a wall or,
 Publish a libelous book.

| P a g e 65
 • In the first case the order is a mandatory injunction and the second
it’s a prohibitory injunction.

• An injunction may be awarded instead of or in addition to damages.

==================================================

Distinguish between:
a) Contracts under seal and simple contracts;
b) Unilateral contracts and bilateral contracts.

4/2004
a)
Contracts under seal:

 Is a formal contract which is in writing and is

witnessed  Some contracts must be in this form to be

valid.

Simple contracts:

 Or informal contracts they can generally be in any

form including that of an oral agreement.
b)

Unilateral contracts:

| P a g e 66
  There must always be at least two persons to make a

contract  But only one of them is legally bound.

 For ex. A promise by the owner to pay a reward for
lost property may be binding but only on the owner who offers
the reward.
Bilateral contracts:

 Each party makes a promise to the other and both are

legally bound.

 For ex. Under an insurance contract the insured is

bound to pay the premium and the insurer are legally bound to
pay valid claims in return.

| P a g e 67
Distinguish between void, voidable and unenforceable contracts,
given an example of each. 4/2003
A void contract:

 Has no binding effect on either party.

 Because it is contract at all the expression is really a

contradiction in terms.

A voidable contract :is

 binding but one (or possibly both) of the parties will have the
right.

 Contracts may be voidable on a number of different grounds

 Such as misrepresentation, drunkenness or insanity.

unenforceable contracts is :

 Valid but it cannot be enforced in a court if one party refuses to

keep to the agreement.

 Such a contract may nevertheless be useful for other purposes; it

may for instance be used as a defence to a claim.

| P a g e 68
 a) Give two examples of non-insurance contracts which, must be
under seal and two, which must be in writing but need not be under
seal.
b) What types of insurance contract (if any) must be in writing and
what types if any must be under seal? 10/2000

• Contracts which, must be under seal include transfers of title to land

(the conveyance which finally transfers ownership of the property
from one party to another) and transfers of British ships or shares in
British ships.
• Contracts, which must be in writing, include billes of exchange,
cheques and promissory notes, the transfer of shares in a registered
company, some consumer credit (hire- purchase) transactions.
c) Marine insurance policies must be in writing (though the policy
need contain very little detail to satisfy the Marine Insurance Act
1906). There is no requirement for any insurance policy to be in form
of a deed.

| P a g e 69
Distinguish between duress and undue influence in the context of the
law of contract. Give an example of each 4/2001

 Originally, duress only arose when a contract was achieved

through force or threats of force against the person of the other
contracting party.

 Later cases recognised duress by means other than physical

violence, e.g. unlawful threats to the plaintiff’s property or business
interests.

 It is now recognised that any threat to commit a legal wrong can

amount to duress if the other party is forced to agree against his
will.

Undue influence is:

 Is a product of equity, which recognised more subtle forms of

persuasion than physical duress.

 It is presumed that certain relationships will give rise to

improper pressure unless the contrary is proved.

 This will occur when one party holds a dominant position over
the other or is able to take advantage of a relationship of trust
and confidence between them.

| P a g e 70
 Common examples include:
- parent and child;
- doctor and patient, - solicitor and Clint;
- Regulation leader and follower (but not husband and wife or
banker and customer).

In the context of the general law of contract. Outline five ways in

which an offer can terminate. 10/2002

| P a g e 71
 A time limit or a reasonable time: an offer will laps if the
offeror imposes a time limit for acceptance and the other party
does not accept within that time.
If no time limit is given the offer lapses after a reasonable time.

 Death: the death of either party before acceptance will usually

terminate the offer. Death after acceptance will not affect most
contracts, except contracts for personal services.

 Acceptance: acceptance of an offer will complete the contract

and bring the offer to an end. If an offer is made to a group of
people but can be accepted by one person only the offer ceases
to exist for the rest of the group when one person accepts.

 Revocation: the offeror may revoke (withdraw) his offer at any

time before acceptance. He may do this even if he has promised
to keep the offer open for a definite period of time unless an
option has been purchased,

 Rejection: if the offeree rejects the offer it then terminates. If he

afterwards changes his mind he cannot complete the contract
since there is now no offer to accept.

 Counter-offer: a counter
offer will also operate as a rejection.

What two types of contract are fully binding on a minor? Illustrate

each one with an example drawn from case law. 10-2003

| P a g e 72
 Types of contract are fully binding on a minor

A minor is bound by contracts for necessaries and by beneficial

contracts of employment or of a similar character.

 Necessaries
• Are the basic products and services of everyday life.
• They were defined in peters v, Fleming 1840 A liable to
pay for necessaries which they have bought They need
only pay a reasonable price.

 Employment and similar contracts.

• The contract is binding provided that it is on the whole for their
benefit.
• In Doyle v, White city Stadium (1935)

===========================================
============================

Types of contract are fully binding

on a minor?

Fall into three categories:

 Contracts which are binding

| P a g e 73
  Contracts which are binding unless repudiated are binding on
both parties but the minor can avoid liability by repudiating the
contract (ex include a lease, a partnership, and the holding of
shares in a company.
 Contracts which are not binding on the minor
- They include contracts to buy goods, which are not necessaries and
contracts to borrow money.
- These contracts do not bind the minor but do bind the other party.
- The minor can sue if the other party does not keep to the agreement.
- The minor does not have to repudiate the contract to avoid liability.

In the context of the general law of contract what is promissory

estopple? Use a decided case to explain the principle. 4/2002 A

promise made without
consideration can not be enforced but
may be used as a defence.

 If X promises not to enforce his strict contractual rights against

Y and the promise is intended to be binding and acted upon,

 X may be estopped (prevented) from going back on this promise

if Y has acted on the strength of it.

| P a g e 74
 In central London property Trust v.High Trees House 1947- the
High Trees case- the landlords of a block of flats had let them to the
defendants at a rental of 2500 a year.

 Owing to the outbreak of war the defendants could find few

tenants for the flats.

 The plaintiffs agreed to reduce the rental to 1250 a year from

1941.

 The defendants continued with the lease but in 1945 the

plaintiffs claimed again the original rent from 1941 on the basis
that no consideration had been given for the agreement to reduce
it.

 The judge held that the plaintiffs were entitled to the full rent
from 1945 but that it would be inequitable to allow them to go
back on their promise and recover the full rent from 1941.

 This principle operates only as a shield and not a sword – a

defence to the party sued rather than a weapon of attack enabling
the other party to sue on a gratuitous promise.

 Promissory estoppel is an equitable principle: the defendant

will not be allowed to claim relief unless he himself has acted
fairly.

| P a g e 75
 Briefly provision s of the Unfair contract Terms Act 1977. How is the
business of insurance affected by the Act? 4/2000

Section2 of the of the Unfair contract Terms Act1977:

 Applies to tort liability.
 It prevents a person from excluding or restricting his liability for
death or personal injury arising from negligence.
 Liability for other forms of damage may be excluded only when
it is reasonable to do so.
Section 3:
• Applies to contractual liability.
• It subjects all standard term and consumer contracts to a
reasonableness test.

| P a g e 76
 Insurance contracts are exempt under the act but as a price for
exemption the insurance industry was required to subscribe to the
statements of insurance practice.

Identify five matters which may render a contract defective Say, in

each case whether the effect will be to make the agreement void or
merely voidable. 4/2000

 Illegality (void)

 Improper pressure (voidable)

 Mistake (void)  Misrepresentation.

(voidable)

 Non-disclosure (voidable)

| P a g e 77
 Briefly describe two of the Following remedies. In each case give an
example of circumstances in which it would be appropriate for the
remedy to be used:

A) Specific performance; 10/2004

B) Prohibitory injunction;
C) Quantum meruit. 4/2003 –10/2004

Specific performance:

Will not be awarded where the plaintiff can be adequately

compensated by an award of damages.
For this reason the courts are very unlikely to award the remedy to
enforce a contract for sale of goods.

Prohibitory injunction: can be sought to prevent a breach of the

promise.
A mandatory injunction is an order requiring the defendant to do
something positive to end a wrongful state of affairs, which they
have brought about.
Quantum meruit: ‫علي قدر ما عملت‬

| P a g e 78
 As much as they have earned or deserved.
 The plaintiff may claim on a Quantum meruit as an alternative
to damages ( planche v. colburn (1831)
==============================

Remedies in contract:

The main remedies in the law of contract are:

 Rescission;  An action for damages;

 An action for specific performance;

 An action for an injunction;

 Action for an agreed sum;

 Restitution

| P a g e 79
 Distinguish between breach by failure to perform and anticipatory
breach of a contract. State three ways, other than by breach in
which a contract may be discharged,

Breach by failure to perform:

 Occurs when one party fails to do what he has agreed to do.

 His performance may be inadequate or he may fail to perform at

all.
Anticipatory breach:

 Occurs when one party renounces the contract before the time to
perform arrives or disables from performing.

 If this happens the other party can sue straight away: he does not
have to wait until the time for performance comes (see for
example hochster v. de la tour (1853).

Besides breach a contract may be discharged by :

 Performance;
 Frustration;
 Agreement;
 Operation of law.

The main provision of the law Reform frustrated contracts) 4/2002

‫مهم‬

| P a g e 80
The law Reform (Frustrated contracts) Act 1943 provides that when
a contract is discharged by frustration:

 All sums paid before frustration can be recovered;

 Money payable before frustration is no longer payable;
 A party may claim, or keep from what she has already been paid
a reasonable sum for any expenses she has incurred before
frustration;

 Where one party has conferred a benefit (other than a money

payment) on the other prior to frustration she may recover a
reasonable sum in compensation;

 The Act does not apply when the parties have made some special
provision in the contract to cover the possibility of frustration.
Insurance contracts (and a number of others) are specifically
excluded.

a) Distinguish between liquidated and unliquidated

damages10/2001

| P a g e 81
 b) State three remedies for breach of contract other
than damages.
10/2001

Liquidated damages are those that are agreed in advance by the parties
to a contract. If the amounts agreed are excessive or unreasonable they
are known as penalties and are invalid.
unliquidated damages are those that are set by the court. Damages in
contract may be liquidated or unliquidated in tort they are always
liquidated.
B) Other remedies in contract include:
• Rescission;
• An action for specific performance;
• An action for an injunction;
• An action for an agreed sum;
• Restitution;
• An action on a quantum meruit.

State four ways in which a contract may be discharged by

frustration. For each cite a case to illustrate the principle involved.

4/0002 ‫مهم‬

Any four from the following:

| P a g e 82
 Change in law or operation of law: Avery v Bowden (1855) or
Baily v De Crespigny (1869).

 Destruction of a thin necessary for performance of the contract:

Taylor v caldwell (1863)

 Non-occurrence of an event on which the contract depends:

Krellvhenry (1903).

 Commercial purpose of the contracr frustrated: metropolitan

water board v dick kerr &CO (1918)

 Death or personal incapacity: Vondor v. the Barron Knights

(1966).

The formation of a valid contract:

=========================

| P a g e 83
 There must be an agreement (shown by offer and acceptance)

 There must be the intention to creat legal relation.

 There must be consideration.

 The agreement must be in the from reguired by law.

 The parties must have capacity to contract.

The offer:
========

• An offer may be made in writing ,orally or by conduct.

• Invitation to treat:

- Which are invitation to make an offer. - The

display of price – marked goods in a shop is
merely an invitation to treat.

Consideration:
===========
Was defined as:

| P a g e 84
 ‘’ Some right, interest, profit or benefit accruing to one party or some
forbearance, determine, loss or responsibility given suffered or
undertaken by the other. “

Rules of consideration:
=================

There are five main rules:

1. Consideration must be real or genuine.

2. Consideration need not be adequate.
3. Must not be past.
4. Consideration must move from the promisee.
5. Consideration must not be something which the promisee is
already bound to do.

Terms of a contract:
===============

Certainty of terms:

The terms of a contract must be certain and no contract is formed if a

vital term is missing or if the meaning is uncertain.
For example:

Scammell v. ousten (1941)

| P a g e 85
- When ousten agreed to take a van on hire - purchase term.
- The court held that the
agreement was void for uncertain as it was
not exactly what hire- purchase terms.

Classification of terms:
------------------------------

 Contract is express term: 10/2004

• Are based on the words spoken by the parties or
• Whiten dowen by them
• Oral sometime present problems.

 Terms implied in fact: 10/2004

• Is one which is not actually stated but is presumed to be intended by
the parties;
• The term may be implied because it relates to something which so
obvious that it goes without saying.

In the leading case of the MOORCOCK (1889) ‫سؤال امتحان‬

| P a g e 86
 The owner of a whrf agreed to provide a berth for a ship.

 But the berth was unsitable and the vessel was damaged when it
struck a ridge at law.tide.

 There was no express term in

the contract that the berth should be suitable
but

 The court held that such a term was implied as a matter of

commercial sense.

 Terms implied by custom or usage:

- Terms can be implied custom.

- The implied terms must not be unreasonable.

 Terms implied in law:

• The right and duties may be based on terms, which the law
applies to the agreement.
• In some cases ,these implied terms arise from past decisions of
the courts.
• In other cases they are created by Act of parliament.

The best known example of such implied terms are those created by
the Sale of Goods Act 1979

| P a g e 87
 Some of provisions of the Act as follow:

 There is implied in contract of sale. A term that the seller has a

right to sell the goods (s.12)

 Where goods are sold by description there is implied term that the
goods will correspond with the description. (s .13)

 When the seller sells goods in the course of business there is an

implied term that the goods supplied under the contracts are of
satisfactory quality s.14

Insurance contract are subject to some implied terms (marine

insurance act 1906) the vessel must be seaworthy

Restitution:
==========

 The law of restitution is concerned with those situation where: a

person is liable to restore property to another.

For example: ==========

a minor who acqures goods which are not necessaries on credit can not
be made to pay for them.

| P a g e 88
 • The law therefore gives such persons remedies in restitution.
• The main remedy is provided by s3 (1) of the mior’s contract
Act 1987
• The Act provides that:
 “the court may if it is just and equitable to do so:
 require the minor to transfer to the other party any property
acquired by the minor under the contract or any property
representing it.

For example:

• if a minor buy motor cycle (which we will assume is not a

necessirty) for 1000 but does not pay for it.
• The court can order the minor to return the machine to the seller.
• If the minor has sold the machine to some one else for 800 the
court can order them to transfer the 800 to the seller.
• If the minor spent the 800 on a holiday no court order can be
made. Since the minor no longer has the priginal property or any
property representing.

Standard terms and exemptions clauses:

Common-law rules:
==============
Incorporation can be achieved in a number of ways:

 Signing of writing documents:

• Where the contract in formed by a singing a written document.

| P a g e 89
 • The general rules that the signer is bound by all the terms of the
documents including any exemption clauses even if they have
not read it.

 Notice:
If there is no signed contract the exemption clause may be incorporated
in a notice displayed at the premises where the contract is made.

Illegality: void

Contracts which are contrary to law:

============================
these includes contracts involving the commission of a crime or tort such
as (contracts to forge banknote steal property or kill or injury other
people)

In some cases:
Merely making the contract will be forbidden by law and the agreement
to make a contract ----- is a criminal such as if two parties agree to break
into a shop.

In other cases:

Contracts are forbidden by statutes but making a contrac is not a criminal

(life assurance act 1774) as no insurance shall be made by a person who
has no insurable interest.

| P a g e 90
Contracts, which are contrary to public
policy: such as ‫سؤال امتحان‬
==================================

 Contracts tending to sexual immorality.

 Contracts affecting the freedom of marriage.

 Contracts of trade with an enemy.

 Contracts to break the law of a friendly foreign state.

 Contracts to deceive public authorities.

 Contracts to corrupt public life.  Contracts which

prevent the course of justice.

| P a g e 91
 Discharge of contracts:
==================

Contract may be Discharge by:

 Performance:
• A contract is performed when each party has carried out their
side of the bargain.
• Failure to perform will usually amount to a breach of contract.

 Breach:
Breach by failure to performance,
Anticipatory breach.

 Frustration.

 Agreement.
• A contract if formed by agreement the parties can make further
agreement to release each other from their obligations.
• By releasing each other the parties both give up a benefit and thus
provide consideration.

| P a g e 92
  By operation of law.
(merger , death , bankruptcy.

Remedies in contract:
==================
The main remedies in the law of contract are:

| P a g e 93
 Rescission.

• Is an equitable remedy and refers to the cancellation of a

contract.
• There are a number of variations in remedy

 Rescission for misrepresentation

Misrepresentation makes the contract voidable , the injury party is

freed from any obligation.

The right to rescind will be lost:

 If the parties can not be restored to their original position.
 If third parties have acquired rights under the contract.
 If there is an unreasonable delay on their part in seeking
rescission.
 Rescission for breach of contract

The failure to perform at all will generally amount to breach.

 An action for damages.

| P a g e 94
 =========================================================================

1-state the five main duties that an agent owes to his

principal? 2004/4

The main duties of an agent to his principal are:

• To obey the principal’s instructions;

• To exercise proper care and skill;
• To perform his duties personally (subject to limited
exceptions);
• To act in good faith towards the principal;

| P a g e 95
• To account for monies received on behalf of the
principal.

1-outline five duties that an agent owes towards his

principal , with an example of each drawn
insurance. 10/2001 from

 Car and skill: the agent must exercise a level of care

and skill that is appropriate for his class of agent: e.g. a
higher level of skill is expected of an insurance broker
than a tied agent.

 Obedience the agent must carry out all legal

instructions: e.g. in arranging cover.

 Good faith: the agent

must act in good faith which his principle: e.g. he must
not accept secret commissions.

| P a g e 96
  Duty to account: an agent must account to the principal
for all monies received UK insurance brokers are
required to
keep client’s money separate from their own in separate
insurance brooking accounts.

 Personal performance: an agent must perform his

duties in person. Certain exceptions apply e.g. delegation of
duties by a broker to his staff would probably fall within
these.

====================

2-briefly explain each of the following in the context

of the law:
- usual authority; 2004/4
b- Agency by necessity.
a

Usual authority:
 An agent may have implied authority to perform those
acts which are usually performed by persons in the

| P a g e 97
 agent’s position or usual in a particular trade or
profession.

 This is known as usual authority (or customary

authority).

 A problem may arise,

however, if the usual authority of the agent has been
restricted by the principal, or if the agent abuses his position
in some way.
 In this case the agent will be acting outside his actual
authority, even though he is doing what is customary.
 In such cases the principal may still be bound by the
apparent authority of the agent.
 See panorama developments (Guildford) LTD v Fidelis
Furnishing Fabrics (1971) , Watteau v Fenwick (1893).

Agency by necessity:

• Agency by necessity arises where a person is entrusted with

goods belonging to another and an emergency makes it
necessary to do something to preserve them.
• An agency of necessity will arise only in cases where it is
impossible to obtain the owner’s instructions in time.
• Such an agency will therefore occur only rarely now, when
modern communication technology is available to most
people.
Creation of agency:

| P a g e 98
 ================
The relationship between the principal and agent may be created
in three main ways:

 Agency by agreement:
i. In almost every case the agency relationship is created
through an agreement between the principal and agent.
ii. This agreement will often be a contract in it self.
iii. The agreement will not amount to a legal contract ,
particularly when the agent receives no commission, fee or
other payment.
iv. The agent drops out of the picture once the contract is made.

The agreement by which the agent is appointed may be

express or implied.

 Appointment by express agreement:

 Most agencies including insurance agencies are created

in this way.
 The agreement may be a formal one , in writing or
informed.
 In some cases the appointment may be in the form of a
deed.

 Appointment by implied agreement:

| P a g e 99
 An agency may be implied by the conduct of the parties and the
relationship between them.

 Agency by ratification: ‫سؤال امتحان‬

A) What is an agency by ratification? 2003/4

In some cases the relationship between the principal and agent

can be created retrospectively i.e. after the agent has carried out
their task under the doctrine or ratification.

b) What conditions must be satisfied for a valid ratification?

A number of conditions must satisfied for ratification to be

possible:
• The principal must be the person whom the agent had in
mind at the time of the act.
• At the time of the act the principal must have full
knowledge of the circumstances relevant to the act.

| P a g e 100
 • The principal must have existed and have the contractual
capacity to do the act at the time.
• Ratification must take place within a reasonable time.
• Void or illegal acts can not ratified.
• The whole contract must be ratified.

Rights of Agents:
===============
An agent has two main rights in respect of their employment
by the principal.
These are:
• Remuneration:
- An agency may be gratuitous, without payment.
- But if there is an express or implied agreement to do so
the principal must reward the agent for any work done.
- Normally, by paying commission.
- The principal must pay normal commercial or
professional rates if there is no guide, a reasonable sum
which can be fixed by a court if necessary.
- In any case the agent must have earned the commission.
Indemnity:
 If agent incur expenses in the performance or their duties
they have a right to be indemnified [i.e. paid back].  The
agent lose the right to indemnity if :
i. Their act was not authorised or ratified by the principal.

| P a g e 101
ii. They are in breach of their duties.
iii. The act for which they claim indemnity is illegal or
void by statute.

Authority of agency:
================
Agents may have different types of authority as follows:
 Actual authority:
 The authority of the agent is real.
 They have been given the right to act on
behalf of the principal.

| P a g e 102
 Actual authority can itself take two forms:

Distinguish between Express actual authority and Implied

actual authority

Express actual authority;

• Arises from the instructions, which have been given to the
agent.
• These instruction form part of the agency agreement and
may be oral or in writing.
• If the instructions are ambiguous the agent should seek
clarification from the principal.
• If the principal can not be contacted no liability will fall on
the agent. Provided that the agent acted in good faith.

Implied actual authority:

 Agents have implied authority to do anything, which
is incidental to, or necessary for the carrying out of
their express instructions.
For example:
An agent may have implied authority to incur travel expenses
or post and telephone charges.
 An agent may have implied authority to perform
those acts which are usually performed by persons in
the agent’s position or usual in a particular trade or
profession.

| P a g e 103
 This is known as usual authority (or
customary authority).

 Usual authority:
==============

Apparent (or ostensible) authority:

============================
 When a third party deals with an agent often they will
not known the exact limit of the agent’s authority.
 Agents may have power to do things, which they
have no right to do and may be able to bind the
principal even when failing to obey the principal’s
instructions.
 Apparent authority arises only when the principal
gives the agent the appearance of authority.

The principal must make some representation, by words

or conduct to the third party that the ant is entitled to act
on their behalf.

Apparent authority can arise in cases where:

 The principal has
restricted the authority of a
validly appointed agent.
 The apparent agent has never been appointed at all.
 Unknown to the third party the authority of the agent has
been terminated.

| P a g e 104
 Contract made by the agent:
=======================
Disclosed principal:

 A disclosed principal is one whose existence is

known to the third party at the time the contract is made.

 In some cases the third party will know that the

agent is contracting on behalf of someone else but not
know the principal’s name.

 In other cases they will be aware of both the

existence and the name of the principal.

 The general rule is that the agent simply drops out

once the contract is made.

 The principal and third party can enforce the contract

against each other but the agent can neither sue nor be sued
on it.

There are exceptions to this rule for example:

- Agents who sign a deed may be liable to on it.
- Trade custom sometimes makes an agent personally
liable on a contract. And
- Agents who sign their name on a negotiable instrument
(such as a cheque or Bill of Exchange.)

| P a g e 105
 Undisclosed principal:

The third party is unaware that they are dealing with an agent.

Enforcement by the undisclosed principal:

i. The general rule is that the undisclosed principal can
enforce the contract against the third party.
ii. To protect the third party some limitation are placed upon
this right.

Undisclosed principal can not:

 Sue if they did not exist or lacked capacity when the
contract was made.
 Ratify a contract.
 Sue if the contract expressly provides that the person
making it is the sole principal.

Enforcement by the third party:

The third party can not sue both and having elected to sue
one. This is known as a right of election.

Other actions against the agent by the third party

The third party may be able to

sue the agent for breach of
warranty of authority or in
tort.

| P a g e 106
Breach of warranty of authority:

If the agent has no authority or exceeds their authority so that

the principal is not bound,
The third party may be able to sue the agent for damages for
breach of warranty of authority.

Actions in tort:
If an agent commits a tort when acting in the course of their
authority the principal will be liable.

Such as: makes fraudulent statements to the third party.

| P a g e 107
 3- State two ways in which an agency relationship may be
created and three ways in which it may be terminated?
Creation (any two of):
• By agreement (or consent); By ratification; By
necessity.

Termination (any three of):

• By agreement between the parties;
• By performance;
• Lapse of time;
• Withdrawal of authority;
• Renunciation by the agent;
• Bankruptcy;
• Insanity; Frustration.

In the context of the

general law of contract out
line five ways in which an offer can terminate. 10/2002

- identifies three of the main duties that an agent

owes to his principal and four remedies available to
the principal where an agent is in breach of his
duties?

| P a g e 108
 Main duties are (any three of):
• To obey the principal’s instructions;
• To exercise proper care and skill;
• To perform his duties personally (subject to limited
exceptions);
• To act in good faith towards the principal;
• To account for monies received on behalf of the
principal.

Remedies are (any four): 10/2004

• An action for damages for breach of contract;
• An action in tort in some cases;
• Dismissal of the agent for a serious breach;
• An action to recover a bribe;
• Rescission of contracts made through the agent (in the
case of fraud);
• An action for an account.

‫متوقع‬

in the law of agency, what is a lien? Distinguish between a

particular lien and a general lien. Give an example of a
lien drawn from insurance,
A line is:
• The right to retain the goods of another as security for
payment of a debt.

| P a g e 109
• An agent may have the right to retain property belonging
to the principal, as security for commission or other
money owed to him.
• A lienoer (person with a lien) has the right to retain
goods but, generally, not the right to sell them.

A lien may be a particular lien, which is the right to

retain particular goods in respect of which payment is due.
Or A general lien arises only by agreement between the
parties or by trade usage.

At various times bankers, solicitors and stockbrokers have

been held by the courts to have a general lien based on
trade usage.

an agent has a general duty to act in good faith in his

dealings with the principal, and a breach of this duty can
take various forms. Outline four examples
• Non-disclosure by the agent: he must not conceal any
relevant information from the principal.
• Confidentiality: the agent must not pass on sensitive
information to third parties without permission.
• An agent must not accept a secret commission from
their agency duties.[ hippisley v, knee brothers m(1905)]

| P a g e 110
• An agent must act in the best interest of the principal at
all times and not put his own interest before those of the
principal.
========================================
==

6
==========================================
Which party makes the offer when an insurance contract
is formed?
Explain whether communication of acceptance for a valid
insurance contract to be formed, illustrating your answer
with case law. 4/2000
Either party may make the offer:
- The proposer may do so when he submits a proposal
form or
- The insurer may do when giving a quotation.
At Lloyd’s the presentation of the slip will usually be an
offer.
Generally there must be acceptance, unless the insured clearly
acts in reliance on an offer made by the insurers.
See, for example TAYLOR V ALLON (1966) [continuing to
use a care as acceptance in motor insurance] AND RUST V
ABBEY Life Assurance Co Ltd (1979) [retention of a life
insurance policy as acceptance).

| P a g e 111
 Under what
Circumstances might an insured be legally entitled to:
A/ a full return of premium;
B/ a partial return of premium? 10/2000

A full return of premium:

 Once the risk has started to run the insured is not legally
entitled to any return of premium if the contract is ended
prematurely.
 However, if the insurers have never been on risk at all the
insured is entitled to recover his premium.
 In the latter case has been a total failur of consideration
which means that the insured has never had anything of value
in return for his own payment (TYRIE V FLETHER (1777)).

A partial return of premium

• The rule in TYRIE is often modified by a specific

cancellation clause which allows the insured a partial
return of premium when a policy is cancelled mid-term ,
even though the risk has obviously started to run in this
case.
• The clause may allow the insurer to cancel the policy
mid-term, having given the required period of notice to
the insured.

| P a g e 112
• In such cases a pro rata return of premium is normally
granted.
• The insured may also be given the right to cancel the
policy, although something less than a full pro rata
return is usually then allowed.

Give a short definition of

insurable interest? 4/2003

There is no single definition of insurable interest but the

following covers its essential elements:
{The legal right to insure arising out of a financial
relationship recognised at law, between the insure and the
subject matter of insurance.}

| P a g e 113
 The key elements of insurable interest.
• A subject matter of insurance.
• The policyholder must have an economic or financial
interest in the subject matter of insurance.
• The interest must be a current interests not merely
expectancy.
• The interest must be a legal interest.

Outline the principle of law illustrated by one of the follow

cases: Macaura v. Northern Assurance co LTD (1925)

 A valid insurable interest must also be a legal interest, that

is one which the law recognises and will support.

 Macaura insured timber on his estate under a fire policy in

his own name.

 Having sold the timber to a company of which he was the

only shareholder.

| P a g e 114
 The House of Lords held that the insured had an interest
in his shares but none in the timber which was owned by the
company a separate legal entity.

 Even though he would clearly suffer an economic loss as

result of his fire because the value of his shares would go
down.

 This decision has no been followed by the courts of some

other countries where the legal system is based on English
Law.

What is the main effect of the life assurance act

1774which
? To
classes of insurance (apart from life) does the 1774 act
apply, and to which classes does it NOT apply?
10/2002

Section 1 prohibited the making of any policy:

…. On the life of any person or persons, or on any other event
or events whatsoever, wherein the person or persons for
whose use benefit or on whose account such policy or
policies shall be made shall have no interest or by way of
gaming or wagering.

| P a g e 115
Thus, the person benefiting from the insurance must have an
insurable interest in the life or event insured.

If there is no insurable interest the contract is void.

Other policies (such as policies covering land or building and

liability insurance) may be covered by the 1774 act.

The 1774 Act does not apply to marine insurance

(insurable interest is required by the marine insurance act
1906 by section 4.)

It does not apply to policies on goods (there is no statutory

requirement for insurable interest, but the Gaming Act
1845 ,section 18 will invalidate the policy if it is no more
than a wager.)
=============================

| P a g e 116
 Briefly explain the main provisions of ONE of the following

statutes. (The Life Assurance Act 1774) 10/2001 ‫متوقع‬

There are four major provision:

 The person benefiting from the insurance must have an

insurable interest in the life or event insured. If there is no
insurable interest the contract is void (section 1)
 The name of the person for whose benefit has been
effected must appear in the policy (section 2)
 The insured can recover no more than the amount of the
value of his interest( section 3 )
 The Act does not apply to insurances on ships, goods, or
merchandises (section 4).

| P a g e 117
What is meant by waiver of insurable introits? For which
classes of insurance may insurable interest be waived? 4/2000-
4/2004

 Waiver of insurable interest occurs when insurers

agree, expressly or implied, to dispense with the
requirement that the insured should have an insurable
interest in the subject matter.

 In the case of policies which are not governed by the

Marine Insurance Act 1906 or the life Assurance Act
1774 such as policies on goods, insurable interest can be
waived.

 See ,for example, the motor case of Williams v Baltic

Insurance Association of London (1924)
========================

For the contract to be valid in law, at time must

insurable interest exist in:

| P a g e 118
 - Marine insurance;
- Life insurance;
- Commercial fire insurance?10/2003
Marine insurance:
================

 The marine insurance act

1906 s.6 provide that the insured must be interested in the
subject matter insured at the time of loss.

 There is no requirement of insurable interest when the

contract is made.
Life insurance:
==============

 Insurable interest is required at the time when the

contract is made (i.e. inception).

 There is no requirement to prove an interest when a

claim arises.
Commercial fire insurance or (other policies)
===================================

 Insurable interest is required both at the time of the loss

and at inception.

 Other policy such as (non-marine, property, pecuniary

and liability insurance.

| P a g e 119
 ‫المهم خاص بالحاالت‬
Application of insurable interest “
=========================
 Family relationships”
--------------------------
 Own life: every person is presumed to have an
unlimited insurable interested in their own life.

 Spouses: husband and wife have a unlimited insurable

interest in the life of each other according to Married
Women’s Property Act 1882.

 Other family relationship: under English Law no

other family relationship gives rise to an insurable interest.

For ex: a parent can not legal insure their child and vice versa

Exception:
• Is found in the Industrial Assurance and Friend Societies Act
1948 and amendment Act 1958.
• These Acts allow a person to effect an industrial life policy
on the life of a parent, step- parent or grandparent for a
maximum sum of #30 to provide for funeral costs.
 Business relationship:
==================

| P a g e 120
 Partners: have an insurable interest in each other lives up
to the amount of loss, which might be caused by the death
of a partner.

 Employee: an employee may insure the life of their

employer.

 Employer: has an
insurable interest in the life of
their employees.

 Creditor and debtor :

A creditor has an insurable interest in the life of their debtor
because they may lose financially if the debtor dies before the
money is repaid.
A debtor: has no corresponding insurable interest in the
life of their creditor.

 Property insurance:
================
There are May examples of persons who may have an
insurable interest in property including the following:
 Outright owners of property.
 Part or joint owners.
 Mortgagees and mortgagors.
 Executors and trustees.
 Landlord and tenant.

| P a g e 121
 Bailess:
• A bailee is a person who has legal possession of goods
belonging to another.
• They have a responsibility to take reasonable care of the
goods which are left with them and look after them.

 People living together:

Person living with another or spouse will have an insurable
interest in property belonging to the other if its use and
possession.

 Finders: a person who finds property may also have a

right to insure it since possession give the finder a right to the
property which is better than that of any person other than the
true owner.

Peter wishes to arrange the following insurance policies in

his own name. In each case say whether the contract is likely
to be valid under English Law giving a reason for your
answer:
a) A policy covering the shop premises that peter leases
from David;
b) A policy covering a rolex watch that peter found in
the street the owner of which has yet to be traced;

| P a g e 122
 c) A policy on the life of Peter’s son Gerald;
d) A policy covering the personal possessions of Peter’s
partner Pauline who lives with them. 4/2002

a) Valid- peter may be

responsible for repairs to the premises under the terms of
the lease.
b) Valid- finders have a title that is better than that of
any person other than the true owner. Interest may
also exist as a bailee.
c) Invalid- under English law, unless there is a business
relationship between peter and Gerald.
d) Valid- if the use or possession of the property is
shared or peter insures as agent for Pauline.

Andrew smith wishes to arrange the following insurance

policies in his own name. In each case say whether the
contract is likely to be valid under English law, giving
reasons for your answer.

| P a g e 123
a) A policy covering a diamond ring that Andrew
found in the street the owner of which has not yet
been traced.
b) A fire insurance policy covering the factory and
office premises of his business Andrew smith
Enterprises LTD.
c) A policy on the life of his personal assistant.
d) A policy on the life of his eldest son who is to take
over the family business when he leaves university.
10/2001
a) Valid- a finder of property has an insurable interest
because his title is better than that of any other person
except the real owner who can not be identified in this
case.
b) Provably invalid- assuming the factory is owned by
the company and not Andrew personally who would
then have no legal interest (see MACAURA V. NORTHERN
ASSURANCE 1925.)
c) Valid- employer has a (technically limited) interest in
the life of an employee.
d) Valid- but only for a nominal sum under English law
( 30)
==========================================

7
==========================================

Distinguish between misrepresentation and non-

| P a g e 124
 disclosure. What conditions must be satisfied for a
misrepresentation to effect the validity of a contract?
4/2002

Misrepresentation: in the general law, is a false statement of

fact, which, induce the other party to enter into the contract.
Non-disclosure: is the omission by one party to reveal to the
other facts that are material to the contract. Or failing to
disclose the whole truth.
Conditions must be satisfied for a misrepresentation to
effect the validity of a contract 4/2004

 Must be one of fact (rather than a statement of law ) 

Must be made by a party to the contract.

 Must be material.

 Induce the contract.

 Cause some loss or to the person who relied upon

it.

Innocent and fraudulent misrepresentation.

====================
===============
• Where a person makes a false statement with the deliberate
intention of misleading another and putting them at a
disadvantage there is a fraudulent misrepresentation.

| P a g e 125
• If the statement is false but there is no intention to
misleading the other party it can be described as a innocent
misrepresentation.
Example of misrepresentation in insurance.
---------------------------------------------------------------
 A person for theft insurance says that the premises are
protected by a burglar alarm when they are not.
 A person for motor insurance declares that their car has not
been modified in any way when it has.
 A proposer for life insurance gives their age as 25 when in
fact they are aged 35.

Positive duty of disclosure in insurance.

===================================

 A contract for the sale of goods is tangible, while

 An insurance contract is dealing which produce which is

intangible.

 This affects the position of both parties

The proposer the insurance policy can not be tested by the
proposer before it is bought.
The insurer: the proposer is the only one who
has full knowledge about the subject matter of
insurance.

| P a g e 126
 Briefly explain the operation of the proportionality principal
in relation to the duty of utmost good faith .why might it be
difficult to implement this principal in insurance markets
such as the UK? 10/2003

In the context of the duty of

utmost good faith, what is
the proportionality principle? 10/2001

 This is a principle that applies in some non- UK countries

when there is breach of good faith.
 Under the principle, insurers can not entirely avoid for
breach of good faith unless there is fraud.

| P a g e 127
 Instead the insurer’s liability for a loss is reduced in line
with the reeducation in premium that the proposer secured
through his misrepresentation or non- disclosure.
 The principal is difficult to apply where there are no
official tariffs or scales of insurance rates or where the
insurers would not have taken the risk at all if they had been
given the full facts about the risk.

Distinguish between a fraudulen

faith and tan
breach of utmost good
innocent to the insurer in eachbreach. What remedies are
case? 10/2002 available

 A fraudulent breach is one is one that is deliberate and

intended to cause some loss or disadvantage to the
insurer such as a reduction in the correct premium.

 In the case of an innocent breach there is no deliberate

intention to deceive.

 In each case there is a

right to avoid the contract ab
initio

 In each case there is a right to affirm the contract.

 In the case of fraud there is a (theoretical) right to

damages.there is non-such right for innocent breach.

| P a g e 128
 In the case of fraud there is a right to keep the
premium. There is no such right for innocent breach.

How is a material fact defined by statute? What options

are available to an insurer when a proposer for
commercial insurance has failed to disclose a material
fact? 10/2001

 The standard definition is provided by s.18 (2) of the

Marine Insurance Act 1906.

 Every circumstance is material, which would influence

the judgement of a prudent insurer in fixing the premium
or determining whether he will take the risk.

 The definition has been held to be a codification of the

common law that applies to all-insurance contracts. 
The insurer may avoid the policy as a whole or simply
affirm it.
 The insurer can not avoid a particular claim and affirm
the policy.

 In the case of fraud the insurer can keep the premium

and (theoretically) claim damages.

| P a g e 129
 Outline four types of fact or information which a proposer
for insurance need not disclose even though they are
material to the risk. Illustrate one type with a decided
case. 10/2000 4/2004
Any four from the following:
• Matters of law- everybody is deemed to know the law.
• Matters of common knowledge- e.g. Carter v Boehm
(1766).
• Factors which lessen the risk – e.g. fire or burglar alarms
that are fitted.
• Facts which the proposer does not know – e.g. Joel v
Law Union (1908).
• Matters covered by policy conditions e.g. facts relating
to excluded risks.
• Matters concerning which the insurers have been put on
enquiry.
• Matters which, need not be disclosed under the
Rehabilitation of Offenders Act 1974 i.e. convictions which,
are spent.

| P a g e 130
 List five types of fact or information that a proposer for
insurance need not disclose, even Though they may be
material to the risk. 4/2004 ‫مكرر‬

What remedies are available to an insurer in the case of:

2- innocent breach of utmost good faith by the proposer;

1- A fraudulent breach of utmost good faith by the

proposer?

Outline the principle of law illustrated by one of the follow

cases: JOEL V. LAW UNION (1908)?10/2001

| P a g e 131
 As a general rule. There is no duty to disclose facts, which
the proposer does not know.

 In this case it was held that the proposer was under no duty
to disclose the fact she had suffered front acute depression
because she had never been aware of the fact that was ill.

 However, in marine insurance there is a duty to disclose

constructive knowledge that is fact, which the proposer ought
to know.

Briefly explain the main provisions affecting insurance of

the Rehabilitation of Offenders ACT 1974? 4/2001 10/2004

 Convictions which are ‘Spent’ Under the rehabilitation of

offenders act 1974 need not be Disclosed.

| P a g e 132
 Under the act an offence becomes spent once a specified
period of time (the rehabilitation Period) has passed since the
date of the Conviction.

 The length of rehabilitation Period various according to the

seriousness of the punishment imposed for the offence.

 A conviction resulting in a custodial sentence of more than

two and a half-year’s imprisonment is never spent.

Matters which must be disclosed

============================
Matters requiring disclosure
can be divided into those,
which relate to: Physical
hazard; Moral hazard.

Physical hazard
=============
Facts in which category include:
 An adequate description of the subject matter of
insurance.

| P a g e 133
 Details of any unusual features of the subject matter.

For example:
Fire insurance The construction of the
building ,the nature of its use
and fire detection
Life insurance Age , previous medical history
Theft insurance The nature of stock its value
Motor insurance The type of car and details of
regular driver

Moral hazard.
==========
Refers to those aspects of the risk which depend on the
character and behaviour of the insured themselves
Example:

• Identity of the insured

• Criminal acts
• Previous losses and claims under other policies
Any other adverse insurance history. Details
of other policies currently in force.

| P a g e 134
 Continuing duty of disclosure:
=========================
Occurs in two cases only:

 Changes in the contract:

• Where there is an agreed change in the
contract during the period of insurance.
• The insured has a duty to notify material facts,
which relate to the change.

 Increase of risk clauses:

 Where the policy requires continuing disclosure
 This is usually achieved through a change in risk or
increase in risk clause. Incorporated in the policy
wording.
 Clauses of this sort have been included in UK fire
policies for many years

| P a g e 135
 What is a change in risk clause? How does it affect an
insured person’s duty of disclosure? 4/2003
Duration of the duty:
=================

 At common law rule:

The duty of disclosure begins at the commencement
of negotiation for insurance when the contract is
made.

There is no generally duty to disclose new material fact which

arise during the currency of the contract.

There is no general duty to disclose new material facts, which

arise during the currency of the contract.

Position at renewal:
===============
If the insurers invite renewal of the contract the duty of
disclosure is revived.
The insured will have the duty to declare any changes in the
risk or new material which arisen during the current period of
insurance.
===========================================

= 8

| P a g e 136
 ============================================
Distinguish between a warranty in relation to the general law of
contract and a warranty in the context of an insurance policy.4/2001
In the context of the general law. A warranty is a minor term the
breach of which allows an action for damages only.
In insurance law. a warranty is a fundamental term the breach of
which allows the injured party to avoid the contract from the date of
breach. In insurance law , a warranty is essentially a promise made by
the insured as to facts or conduct that must be strictly complied with. It
can be implied express or arise through a basis of the contract clause.

a) How does a warranty in the context of insurance differ from a

warranty in the general law of contract?
b) What is a warranty of opinion? 10/2000
a)
b) Warranty of opinion:

 A proposer for insurance may promise that something is true to the

best of his knowledge and belief.

| P a g e 137
 In this case there is not a warranty of fact but a warranty of opinion
only.

 In this case insurers may repudiate the contract only if the

statement was not made in good faith in other words if it was made
dishonestly.

What is the function of a continuing warranty in the context of

insurance? Give four examples. 4/2002- 4/2004

 Continuing warranties: are often applied by insurers to ensure

that some aspect of good housekeeping or good management is
observed.

 Alternatively, the function of the warranty may be to ensure that

certain high-risk practices or activities are not introduced without the
insurer’s knowledge.

| P a g e 138
 The warranty may require, for example:
• Rubbish to be cleared up each nigh;
• An intruder alarm system to be kept in good working order and
regularly tested;
• That the insured should take safe keys home with him when he
leaves business premises at night;
• That no inflammable oils may be stored;
• No work carried out at a greater height than 12 metres; No
woodworking should take place.

What the effect of a basis of the contract clause? Explain ABI

Statements of insurance practice modify the use of such
clauses.10/2002

 Warranties can arise from the answers which the insured gives to
the questions on the proposal,

 And the declarations which he signs at the foot.

 In Dawsons vBonnin (1922), the proposer stated incorrectly the

address at which his vehicle was garaged.

 In response to a question on the proposal form.

| P a g e 139
 There was a statement that the proposal would be the basis of the
contract.

 The court held that this in itself was enough to turn the statement
on the proposal into warranties.

 Basis of the contract clauses have been the subject of criticism in

resent years.

 In view of the possible harsh results of applying these clauses,

 Insurers often in practice ask the proposer to state only that the
answers are true to the best of his knowledge and belief.

 This means that the proposer can not be penalised proovided he

answers the question honestly.

 The statement of general insurance practice makes this approach

compulsory for non-commercial insurances and thus limits the
use of basis of the contract clauses.

What remedy is available to the insurer when a policyholder break

a condition precedent to liability? Give an example of a condition
precedent to liability. 4/2002

 If a condition precedent to liability (or recovery) is not

observed the insurers may avoid liability for a particular loss.

| P a g e 140
 However they may not repudiate the contract as a whole if a
further loss occurs they must therefore pay, provided the insured
in this case complies with the condition.

 Claims conditions such as those requiring the insured to give

notice of a loss provide an example of this category.

a) Outline three sets of circumstances in which insurance may be

illegal.
b) How does an illegal insurance contract differ from one that is merely
void? 10/2003

| P a g e 141
 A/5 breach of warranty or condition:

Breach of warranty
--------------------------------------

• The insurers may avoid the policy entirely.

• The right to avoid arises from the time of the breach.
• The insurers do not have to prove a connection between the breach
and loss, which has occurred.
• The insurers can not avoid a particular claim and allow the contract
to continue.
• They must either avoid the policy entirely or waive ‫ يتناز‬/ ‫ يتخلي عن‬the
breach.

Breach of condition precedent to the contract. ‫خرق الشروط السابقة للعقد‬

 Similar to breach of warranty.

| P a g e 142
 The insurers may avoid the contract as a whole from the date of
the breach.
Breach of condition precedent to liability:

The insurers may not avoid the policy of the claim but may claim
damages.

A/6: statements of insurance practice:

 The statements of insurance practice affect an
insurers right to avoid a policy for breach of good faith.
 The statement of general insurance practice
also modifies the rules on breach of warranty or
condition.

First: the statement of general insurance practice states that

1/ the proposer should not be required to guarantee the absolute truth of
answer which they give on the proposal form, but should merely promise
that they true and belief.

Second: the use of basis of the contract clauses is severely limited so

that they will not,
In most cases, have the effect of creating warranties the relevant
provisions or as follows.

The statement prevents insurers from refusing a claim on the grounds of

breach of warranty unless the breach did not in fact cause or contribute
to the loss.
Finally:

| P a g e 143
 The statement apply to private insurances effected by UK
policyholders only and not to commercial insurances.

A/7 compulsory insurances :

====================

So far ‫ فيمااا سااب‬the principles of good faith apply to compulsory

insurances in the normal way. And allow insurers to avoid such policies
for misrepresentation or non- disclosure.
There are no special rules:
- However, there are special rules for compulsory insurance when
it comes to breach of warranty or breach of condition.
- These rules are complex these are described only briefly here,
they related to motor ins, and employer’s liability ins. A7/ a
motor insurance:
- Is governed in the UK by the road traffic Act 1988.
- The purpose of the insurance rules of the road traffic Act is :
To make sure that a road accident victim will always receive
compensation if they are injured by the negligence of another, personal.
- Insurance is made compulsory so that even though the
wrongdoer may be unable to pay the damages themselves, their
the insurers will do so.
- However, if the wrongdoer has invalidated Their own insurance
by breaking a warranty or condition, the victim might get no
compensation at all because, the insurers will Have the right to
refuse the claim or avoid the Policy.

The road traffic act 1988 therefore stipulates that: an insurer can not
avoid liability by relying on certain types of policy condition or
warranty.

| P a g e 144
 Motor insurance.
• If a policyholder injures somebody when they drunk or their car
is UN-roadworthy
• The insurers can not refuse to indemnify them by relying on
policy conditions which exclude liability when the driver is
under the influence of drink or drugs
• Or which require them to maintain the vehicle in a roadworthy
condition at all time.

But in according to road traffic act 1988 the act allows insurers to
reclaim from the policyholder themselves any damages, which they
have, been obliged to pay to the victim as a result of the operation
of s.148.
======================
Employer’s liability insurance:
• In the employer’s liability (compulsory ins.) regulations 1998.
• Four types of condition or warranty are prohibited by the
regulations.
• As a result of these prohibitions an insurer can not for
instance, repudiate an employer’s liability claim on the grounds of late
notification or because the insured has failed to comply with a policy
condition which requires them to take reasonable care to protect their
employees against injury or disease
• The use of policy excesses (deductibles ) is also prohibited

B/ VOID AND ILLEGAL CONTRACTS:

=================================
In insurance contract:
Will be void if the insured has no insurable interest in

| P a g e 145
 There are other circumstances where an insurance contract may be
void as follows:

B/1 Mistake:
The principles governing mistake apply to insurance contract in the
usually.
 Although examples of
fundamental mistake are rare and little
insurance case law exists.
Beach v.pearl assurance co. ltd. (1938)
 the proposer wished to insure the life of her mother marry ellen
ince
 but the company’s agent thought ‫ اعتقدت‬that the policy was to be
the life of her grandmother,
 The policy was issued in the name of marry Ellen ince.
 But the details were appropriate to the grandmother and the
premium was calculated on the basis of the grandmother age.

 The Industrial Assurance Commissioner dismissed ‫ رف‬a claim

for payment on the death of mother because there was no
meeting of minds between the parties and a valid was therefore
never made.
 The company agreed to return the premium paid.

B/2: Illegality
• Contracts generally will Be Void if they are Illegal or against
public policy and
• The same is true in the case of insurance contracts.
• Illegally can arise in a number ways:

| P a g e 146
  NO INSURABLE INTEREST :
An insurance a contract may be illegal and void because would be
insured lacks the insurable interest required by statute.

 PURPOSE OF CONTRACT ILLEGAL :

- The purpose of the contract may be illegal or against public policy.
- Contracts of insurance with enemies or on enemy property may fall
in the category.

 UNLAWFUL USE OF INSURED PROPERTY :

If insured property is used unlawfully, the contract may be rendered
Illegal
- In Marian insurance law. There are decision Which suggest that
policies of insurance on Illegal adventures are themselves illegal.

 Close connection with a crime: an insured can not in most cases

recover compensation for A loss caused by his Owen crime.

There are two principles involved her:

First:
There is the basic principle of insurance. Whereby the insured is not
entitled to recover for loses caused by their own (willful misconduct
) Second:
Public policy may present the insured from recovering Where,
Allowing them to do so. Might encourage other people to break the
law.

B2/A – LIFE INSURANCE: v. important 10/2002

=====================

| P a g e 147
 Beresford v. Royal insurance CO.LTD (1938‫) قضية االنتحار‬
‫ المؤمن له ارتكب انتحار‬-1

1- The insured committed suicide,

2- Intending that the policy money be used to pay off his heavy
Debts, ‫ إثا ثقيل‬At a time when suicide was a criminal offence
‫إثا جنائي‬
3- It is a basic principle of insurance that losses must be fortuitous if
the insured is to recover.

4- However ,it was held that The policy did cover suicide ‫لوثيقة غطت‬

‫االنتحار‬and the insurers could extend the policy to cover acts of

wilful misconduct’s (the first principle )

5- The court held that: public policy would prevent a recovery being
made because payment would allow the insured to benefit from his
criminal act in that estate would be freed from debts. ‫تمنع المؤمن على‬
‫حياته من االستفادة من عمله االنتحاري‬
6- There is no doubt that the courts would now reach a different
conclusion in relation to the issue of public policy because suicide
is no longer a crime.

B/2/b – Property Insurance:

============================
‫تأمين علي الممتلكات الي اكتسبت بطريقة غير شرعية بواسطة حملة الوثيقة ( المؤمن له) مثل سرقة‬

‫البضاعة) بالتأكيد سوف تكون غير قانونية‬

Case:
In geismor v. Sun alliance (1977)
 The insured had not stolen the insured property( Some items of
jewelry )
 But had smuggled it into the U.K. without declaring it and
paying the necessary excise duty
 ‫لكن تا تمريبما إلى داخل إنجلترا بدو دفع الضريبة الواجبة‬

| P a g e 148
  This made them liable to porfeiture ‫مصادرة‬
 The court held that the plaintiff Could not recover for the theft
under his insurance As this would (at lest indirectly ) allow him
To profit his
 (‫ال يسترد الم من تقويضا عن سرقة البضائع الممربة ) ضد السياسة القامة‬

B/2/c – Motor And liability insurance:

In motor insurance:
------------------------------------
In seems that only a deliberate Criminal Act ‫( عمل جنائي متقمد‬Such as:
where a Vehicle is used as a weapon ‫س‬to deliberately kill or injured
by another can claim damages Directly From the insurer in such cases
(under the road traffic act 1988 s.151.
If the wrongor has no insurance, the victim has a similar claim against
the motor insurance bureau ‫( مكتب‬MiB)

In the case of other liability INS.

===================================

A deliberate or even reckless ‫المتهور‬

Glay v.barr (1971)
- Where a man shot ‫ أطل نار‬And killed his wife’s lover ‫عشي‬
‫ال وجة‬
- He had deliberately taken a loaded gun with intention of
frightening ‫يرعب‬his rival ‫ المنافس‬who was of Killed when the
gun accidentally went off ‫ ذهب بقيدا‬in a scuffle.

The Court:
He was acquitted of murder and manslaughter
in a criminal trial but

| P a g e 149
 He claimed indemnity under the personal liability section of his
household policy but the Court refused to allow him to recover

============================================

9
============================================
/* assignment Occurs when a policy is transferred from one Person to
another.
• Some classes of insurance are frequently
assigned ‫يتخالي عان بطريقاة‬
‫ررعية‬
• The assignment of policies is governed by s. 50
of the marine insurance act 1867.

| P a g e 150
 There are three types of assignment: ‫سؤال‬
 Assignment of the subject –Matter Of the contract.
 Assignment of the benefit of the contract.
 Assignment of the contract itself.
-------------------------------------------
 A/1 Assignment of the subject –Matter Of the contract.
• Will often be transferred from one person to another: motor
policyholder may sell their car to another.
• Assignment of the subject matter does not carry with it any assignment
of the policy is question.

• If the insured disposes of ‫يتخلم من‬the subject matter of the insurance the
usual effect will be to bring the contract to an end.
• The assignment of the subject matter does not usually transfer any
rights under the policy and will terminate ‫ ينقضاي‬/ ‫ ينتماي‬the contract
automatically.

 A/2 Assignment of the benefit of the contract.

 The right to recover money under an insurance contract can be
assigned to another person.

 The entire contract is not assigned but the benefit of it ‫ال يتا التنااز‬
‫عن الققد كل ولكن المنفقة فقط‬
 There is no change in the subject matter of the contract or other
aspect of the risk.

 The assignor ‫ المتنااز‬simply requests that the proceeds of any

valid claim should go to the assignee ‫ المتناز ل‬in question
Assignment can be (a statutory assignment or equitable ‫عاد‬
assignment.

| P a g e 151
 The rules connected with these methods of assignment:
 Notice must be given to the insurer if the insurer is to be liable
directly to the assignee
 If no notice is given, the assignee ‫ المتناز ل‬can only enforce / ‫يفتر‬
‫ي كد‬their rights by bringing an action against the assignor.
 Although notice should be given to the insurer, their consent
‫موافقة‬is not necessary.

 The assignment can take place either before or after the loss.
 The assignee need have no insurable interest in the subject
matter of the insurance ‫ال نحتاج إلى وجود مصلحة تأمينية‬

For example:

- An insured might assign ‫ يتخالي عان‬the benefit of their household

policy to a builder for repair of storm damages which the policy
cover.
- the insurer must be notified of this arrangement and is under no
legal obligation to pay the builder directly,
- The insurers do not have to consent to the arrangement but
merely have notice of it.
- The insurers do not have to consent to the arrangement but
merely have notice of it.
- The arrangement could be made before any damage occurs or
afterwards.
- The builder need have no insurable interest in the house.

A /3 –Assignment of the contract itself:

The assignment of an entire insurance contract is subject to some
limiting factors

| P a g e 152
 A3a/ personal contracts are not freely assignable:
=====================================
Since, many insurance contracts are of (personal character), in the
sense ‫ بمقني‬, that the terms of the cover granted ‫ ممنوحة‬to the insured by
the insurer will often depend to some extent on the insured’s own
personal characteristics.

(Motor policies) For

example:
- in the motor policy the cover granted and the premium

payable ‫ الواجب دفق‬will depend not only on the vehicle to be insured

but also on the age, occupation ‫ الحرفة‬experience and during record

of the proposer and of the other people whom the insured may
allow to -------

Most property insurance:

--------------------------------
Will also be (personal contracts) because the risk is likely to depend
partly on the nature of the person who controls and manages the
property and the particular use he makes of it .

Liability insurance:

| P a g e 153
 ------------------------
- Depend on a personal character
- Since the risk depends on the identity of the insured, the contract
can not be assigned without the consent of the insurer.
================================
case : Peters v. General accident fire &life assurance co.ltd (1938)

A3B/ Assignment must take place ‫ يقعع‬at the time when property is
transferred
==========================================
• if a policy is assigned when the property it covers is sold, the
assignment must take place at the time of the sale.
• The policy will normally lapse ‫ تنقل من مالك الي اخر‬automatically.
• If assignment is at tempted before the sale,
• The ---------may not yet have sufficient insurable interest in the
property to make the insurance valid.

| P a g e 154
 Give to example of insurance contract that are freely
assignable .in each case explain why the right to assign is
unrestricted.10/2002 10/2004

 Marine cargo insurance. Marine cargo policies are an

exception to the rule that insurance contracts can not be
freely assigned.

 The owner of cargo may change several times in the

course of a voyage and it is convenient if the insurance
cover can be transferred at the same time.

 Normally the risk will not alter as a result of change in

the ownership of the goods.

 Because they will usually remain on the same ship.

 A cargo policy is therefore not a personal contract and

there is no reason why assignment should not take place.

 Marine hull policies are not freely assignable because

the ownership of a vessel will affect the risk.

| P a g e 155
 Life insurance. Life insurance policies provide a means
of investment as well as a source of protection

 And many life policies acquire a cash (surrender) value

once a certain number of premiums have been paid.

 The insured then has a useful and valuable piece of

property which, he may sell or transfer to another or use
as security.

 Life policies are freely assignable because provided the

identity of the life insured does not change on
assignment there is no change in risk.

 In this sense life policies are not personal contracts.

 The risk does not change when the contract is assigned.

Absolute and conditional assignments: ‫التناز المشروط المطل‬

----------------------------------------------
• The assignment of a life policy may be absolute or a
conditional assignment.
• Such as to cover mortgage ‫الرهن الققاري‬debt.

Types of assignment:

| P a g e 156
 A3E / Assignment of insurance contracts by operation of
law: 10/2003
==========================================
• On the death or bankruptcy of the insured.
• His rights under the policy pass to ‫تنقال إالى‬their personal
representative or trustee ‫ الوالاي‬in bankruptcy as the case
may be
• Policies often specifically provide that:
‘Cover will continue following this sort of involuntary ‫إلزامعي‬

‫كرهعا‬assignment even though they may expressly ‫بوضعو‬ prohibit

any voluntary ‫تطوعي اختياري‬assignment by the insured’

A) Distinguish between the voluntary

assignment of a contract and assignment by
operation of law?
b) In what circumstances might an insurance contract be
assigned by operation of law? 10/2003
Assignment of insurance contracts by operation of law:
• On the death or bankruptcy of the insured.

| P a g e 157
• His rights under the policy pass to ‫تنقال إالى‬their personal
representative or trustee in bankruptcy as the case may
be Policies often specifically provide that:
‘Cover will continue following this sort of involuntary ‫إلزامعي‬

‫كرهعا‬assignment even though they may expressly ‫بوضعو‬ prohibit

any voluntary ‫تطوعي اختياري‬assignment by the insured’

Explain the concept of imputed knowledge in relation to

the lay of agency give an example drawn from insurance.
10/2002

 An action which, is carried out by an agent is treated in

law as the principal’s own action,

 So that the principal becomes liable for his agents deeds

and can be bound in contract by the agent.

 In the same way under the law of agency any knowledge

which an agent possesses is imputed to the principal:

 The law assumes that the principal is aware of the

information which, has been given to the agent.

 In other words, what is known by an agent is deemed to be

known by the principal also.

| P a g e 158
 In insurance, one of the agent’s main duties is to pass on
information.

 For example an insurance broker will often be required to

pass on information which he has been given about a risk to
the insurers.

 Thus what is known to the agent is deemed to have been

known by the principal.

 This is of particular importance in relation to the duty of

disclosure.

Outline the principle of law illustrated by one of the follow

cases: A) Murfitt v. royal (1922)
B) Peters v. General accident fire &life assurance co.ltd
(1938) 4/2004
a)
 Insurance intermediaries are often empowered by
insurers.
 To grant cover and will action on behalf of the insurer.
 This will be case where the agent has actual authority to
grant cover or where they have apparent authority only
Murfitt v. royal (1922)
- The agent had no actual authority to issue cover.
- But the company had ratifies their ultra vires

| P a g e 159
- action on two previous occasions ‫ م ئمة‬/ ‫ ضرورة‬/ ‫فرالة‬

- This led ‫تررد‬the insured to think that the agent had authority. To
issue cover and they (the insured) would have been prejudiced if
this had not been the case.

The insurer were therefore bound by the policy. b)

“Since the risk depends on the identity of the insured so.
The contract can not be assigned without the consent of the
insurer” case: Peters v. General accident fire &life
assurance co.ltd
(1938)

 The seller of a van handed over his insurance policy

with vehicle.

 The buyer insured the plaintiff, who obtained a judgment

against him.

 The court held that the insurers were not liable to satisfy
the judgment because the policy could not be assigned
without their consent.

So , if A sellers their car to B

, A’s insurers will ask B to submit new proposal for if they are
cover the risk and make a new contract

| P a g e 160
======================
=====================

10
============================================
Notice and proof of loss:
====================

 When a loss occurs the insured will always be required

by a policy condition to give notice of the loss.

 Often the condition will also require the insured to give

notice of any incident or event which may give rise to a

claim  So that the insurers are forewarned when a

claim may be imminent

Time limits for notification

| P a g e 161
 ======================

 A time limit for notification (15 or 30 days) may be

given by the insured.

 If the insured fails to comply with the time limit.

 The insurer may have the right to deny liability for the
loss because a provision of this sort will usually be a
condition precedent to liability.

The burden of proof:

=================
The insured must give full particulars of the loss or provide
such proofs and information as may reasonably be required.
The insured must be able to establish two things:

 That the loss was caused by the operation of an insured

peril;

 The amount of their loss.

| P a g e 162
 A loss has occurred under a property policy.
a) What must be proved in order to establish liability
under the policy?
b) What standard of proof is required?
c) Upon whom does the burden of proof rest? 4/2000
a) It must be established that the loss was caused by an insured
peril or the case of an all risk policy that the loss was
accidental. The amount of the loss must also be proved.
b) Proof is required on a balance of probabilities- the normal
standard of the civil law.
c) The initial burden of proof is on the insured but the burden
switches to the insurers if they allege that the loss was caused
by an excepted peril.

| P a g e 163
 In relation to insurance claims distinguish between excepted
perils and uninsured perils. In what circumstances is the
distinction likely to be important? 4/2003
Excepted (or excluded) perils: are used to limit the
scope of the insured perils and losses from any other
source than an insured peril are simply uninsured.
For example: a basic UK fire policy covers the Risks of fire
lightning and explosion but excludes for example fire caused by
earthquake, riot, war and a number of other risks
Uninsured perils: peril which obviously not covered by the
policy but which it is unnecessary to exclude.

Named perils policy (e.g. fire INS.)

1) Insured perils e.g. fire
2) Excluded perils e.g. fire caused by earthquake or war
Risks or nuclear risks
3) Uninsured perils e.g. loss by theft
All risks policy (e.g. personal all risks)
1) excluded perils e.g. wear and tear ,gradual deterioration 2)
insured perils any from of loss other than (1)

What is the proximate cause?

 There is no standard legal definition of proximate cause.

| P a g e 164
 It has been described in various cases as the (active,
direct, real, immediate. Dominant. Operative or efficient
cause of the loss.
 Remote causes which play only a small part in bringing
about the loss.
 A remote cause being more or less the opposite of a
proximate cause.

Outline the principle of law illustrated by the following

cases: Leyland shippin v.norwich union fire insurance.
10/2000

 The leading authority on proximate cause is the decision

of the House of Lords in Leyland Shipping v Norwich
union fire insurance society LTD (1918).

| P a g e 165
 Many earlier cases had
been decided on the basis that where there was a chain of
events the last event to occur was the proximate cause but the
Leyland shipping case clearly put an end to this theory in
English law.

 A ship was insured under a policy which covered perils

of the seas, but excluded was risks

 She was hit by an enemy torpedo and despite being

badly holed and in danger of sinking reached the port of
Le harbour master ordered the ship to an outer berth to
save the harbour from being blocked if she sank.

 Which she did after she left port.

 The House of Lords had to decide whether the proximate

cause of the loss was the torpedo (a war risk which was
excluded) or the storm which was the last event to
happen and was insured as a peril of the sea.

 Under the old approach the storm would undoubtedly

have been regarded as the proximate cause of the loss as
it was the last cause,

 But the court held that the torpedo was the proximate
cause of the loss because the damage it caused had been
effective throughout.

| P a g e 166
 The chain of events had not been broken .

Outline the principle (s) of law illustrated by ONE of the

following cases.

a) Young v. sun alliance &London INS.1977

b) Sofi v. prudential Assurance company ltd (1990) 4/2003

a) Young v. sun alliance &London INS.1977

 In deciding the meaning of a word the court will pay

attention to its context. That is words, which surround it.

 This broad principle of interpreting a word in the light of

other words used with it is sometimes described as the
noscitur a sociis rule,

| P a g e 167
 In Young v. sun alliance &London INS.1977 the court
held that seepage of water from a meadow into a downstairs
lavatory to a depth of no more than a few centimetres was not
a flood within the meaning of the insured’s household policy.

 The perils storm, tempest or flood were grouped

together in the policy wording ,suggesting that flood meant
something exceptional violent or on a large scale like the
other two perils
Or
b) Sofi v. prudential Assurance company LTD (1990)

 In Sofi v. prudential Assurance company LTD (1990)

conditions requiring the insured to take reasonable care
to avoid loss in a personal all risk policy and travel
policy were interpreted in this way.

 The insured had been travelling to France and arriving at

the Dover ferry with time to spare,

 Left his car in an unattended car park for 15 minutes.

 Some 50000 worth of valuables were locked in the glove

compartment of the car and these were stolen when the
car was broken into.

| P a g e 168
 The court of appeal decided that the insured was
entitled to claim because his conduct although
careless was not reckless.

The ejusdem generis rule:is

=====================
• A rather more specific principle of construction based on
context.
• It provides that general words, which follow specific words
are taken as referring to things of the same kind (ejusdem
generis) as the specific words.

In Thames and mersey ins, co, LTD v. Hamilton Fraser co.

(1887).

 The breakdown of a donkey engine was held not to be

inured under an old marine policy covering perils of the
seas…. And all other perils losses and misfortunes.

 This was so because the general words all other perils

looses and misfortunes were held to refer only to risks of
the same kind as perils of the seas.

| P a g e 169
 Common law rules for the interpretation of insurance
policies.

 Ordinary meaning:
===================
• In the case of dispute, the court will assume that the
parties intended the words in question to bear their
ordinary meaning.
• This is ,essentially the same ‘literal rule’ that applies to
the interpretation of statutes.
For exampleL:in Thomson v.Equity fire ins. Co, 1910.
 A fire policy covering a shop excluded liability for loss
or damage occurring.
 While gasoline is stored or kept in the building insured.
 The policyholder did in fact have a small quantity of
gasoline which he used for cooking but .
 The court held that the exclusion did not apply because
the words ‘stored ;or kept in their ordinary meaning
implied storage in large quantities for the purpose of
trade.

| P a g e 170
 Technical or legal meaning.
======================
- The presumption that words are intended to bear their
common meaning will. However not apply if the word in
question has a clearly established technical meaning.
- In this case the technical meaning is taken to be the one
intended.
- Insurance policies also often use words which have a distinct
legal meaning .
- Words like theft and riot both used in property insurance
provide good example.
In leading case of London &lancashire fire ins.co. v
Bolands (1924)
• The insured held a theft policy which excluded losses
caused by riot .
• Four armed men staged a hlod-up in the insured’s
baker’s shop.
• And made off with all the money they could find.
• But the insurers denied liability on the grounds that this
constituted a riot.
• The House of Lords upheld this interpretation of the
policy since the law at the time required the involvement
of no more than three people in the case of riot and the
other elements necessary for the commission of the
crime were present.

| P a g e 171
 Explain the operation of the contra proferentem rule and
illustrate your answer with example drawn insurance.
10/2002

 Words used in insurance contracts may be genuinely

ambiguous i.e. carry two or more possible meanings.

 A dispute may arise

because the insured insists on one meaning and
the insurers insists on another.

| P a g e 172
 In this case the courts may apply the contra
proferentem rule.

 Under the rule the clause is construed against the party

who proposed (i.e. the drafter of the clause) so that the
other party is iven the benefit of the doubt.

 Since insurance policies are almost always drawn up by

the insurers an ambiguous wording will generally be
construed in favour of the insured.

 However, in some cases a broker actin for the insured

will put forward clauses, which he wants to put in the
policy and any ambiguity in these will be interpreted in
favour of the insurer.

 This is because the broker will be actin as an agent of

the insured when proposing the clauses.

 The contra proferentem rule is illustrated by Houghton v

Trafalar insurance (1954) and English v Western 1940.

 Marks were awarded for an outline of one of these or

any other appropriate.

| P a g e 173
Outline the principle (s) of law illustrated by ONE of the
following cases.
a) Dunholme v. Bentley (1996) 10/2003

Dunholme v. Bentley (1996)

 In this case however the effect was to widen the scope of

the cover and not to narrow it.

 A Mrs Bentley had parked her car at the side of a major

road. Having run into of petrol.

 After about ten (10) minutes a cooleague stopped on the

other side of the road.

| P a g e 174
 Mrs Bentley rushed across the road to talk to her
colleague but ran into the path of a car driven by
Dunholme.

 Mrs Bentley was killed and Dunholme was seriously

injured.

 Dunholm brought an action in negligence against the

estate of Mrs Bentley and her motor insurer were called
upon to pay the claim.

 The motor policy covered liability caused by or arising

out of Mrs Bentley’s use of the motor vehicle.

 However, the motor insurers denied liability pointing

out that Mrs Bentley’s car had been properly parked about ten
minutes before the accident occurred .

 And therefore the accident was not caused by of her use

of the car.

 The court of appeal accepted that : the accident for

which she was liable was not caused by the use of the
car.

 But held nevertheless that the accident did arise out of

the use of the car and the insurers were liable the
inclusion of the words arise out of indicated that the

| P a g e 175
 doctrine of proximate cause was not to be applied
strictly and that cover operated where the use of the car
was only a remote cause of the accident.

Inconsistencies:
=============

 Insurance polcies like other written documents

sometimes contain inconsistencies or contradiction.

 The court have developed a number of rules for dealing

with this.
First:
Where printed words conflict with words which are
handwritten or typed. The latter take precedence since it is
assumed that the parties intended to adapt a standard from to
meet the needs of their particular loss.
Second:
In the case of contradiction between a proposal, which is
made the basis of the contract and terms of policy document,

| P a g e 176
 which is issued, latter the policy document is likely to take
precedence.
Finally:
An express term of the
contract will overrule any
implied term

The principles of interpretation

Fall into categories:

• Statutory rules;
• Common law rules.
Common law rules:
=================

 Ordinary meaning {see thompson v, equity fire ins. co.

(1910) }.

 Technical or legal meaning {see London &lancashire

fire ins. Co. v. bolands (1924) {

 The importance of context.

 { see young v. sun alliance London ins. (1977) } (rule
nosciture a sociis)

| P a g e 177
 {See thames and mersey ins. Co.ltd (1887) ejusdem
generis rule.

 Ambiguity: the contra proferentem rule.

{See Houghton v. tralalgar ins.
Co. ltd .( 1954)

Concurrent causes (at the same time) ‫أسباب متزامنة‬

=======================================

 Occasionally two or more perils operate concurrently

(i.e. at the same time) to bring about a loss.

 Where the perils are independent ( in the sense that one

did not lead to the other .

 The insurers are liable for that part of the loss

attributable to whichever peril is insured.

 In other cases the perils may be not only independent

but also interdependent (in the sense that neither peril
would have caused damage on its own.

Insured peril combines with excepted peril:

| P a g e 178
 ====================================
• If one peril is an insured peril and the other is an excluded
peril.
• The exception prevails and the insurers have no liability at
all.

For example:
In Wayne tank and Pump co.LTD v. Employer’s Liability
ins. Corporation LTD( 1974)

 The insured company had built a storage tank at a

plasticine factory.

 A fire started in the tank and destoryed the factory, so that

they had to pay damages to the owners .

 The fire for which they were legally liable arose from a
combination of two causes.

 First: from the defective state of the equipment

installed (

| P a g e 179
 ============================================

11
======================
======================

Distinguish between an indemnity (insurance) contract and a

non-indemnity insurance) contract. Give two examples of
each. 10/2001 10/2002

Indemnity (insurances) contract are:

 Those where the insurers agree to pay only when the

insured suffers a loss of a particular type and only for the
amount of the loss.

 Most types of general (non-life) insurances are indemnity

contracts, ie virtually all property ,pecuniary and liability
insurance including motor marine and aviation.

Non-indemnity insurances contract are:

• Policies in which insurers agree tom pay a specified sum
when a particular event occurs.

| P a g e 180
• The insured does not have to prove that he has suffered a loss
only that the event has happened
• Non-indemnity contracts life insurance and most personal
accident contracts.

Meaning of indemnity:
==================

 The word indemnity means literally, to save from loss or

damage.

 Indemnity means the protection or security against damage

or loss.

 Insurance policies as contracts of indemnity we mean that

they are intended to provide financial compensation for a loss
which the insured has suffered and put them in the same
positions after the loss.

Measure of indemnity:
==================
• A claim is unliquidated damages.
• This means that the amount of compensation is not
known in advance.
• But is to be fixed afterwards on the basis of the loss
actually suffered.

| P a g e 181
 • In fact, the method by which indemnity is to be
measured depends upon:
- The type of insurance;
- The nature of its subject matter.

Property insurance:
--------------------------
The general rule is that:

 The measure of indemnity for the loss of any property is

determined not by its cost, but its value at the date of loss
and at the place of loss.

 If the value has increased during the currency of the

policy.
 The insured is entitled to an indemnity on the basis of the
increased value .
 Similarly , if the value has decreased during the policy
period
 The insured will recover only the reduced value. At the
time of the loss not the original value. (See Re wilson and
scottish ins. 1920) if the policyholder can recovr only the
amount of the value of the property itself.

| P a g e 182
 They can not claim for loss of prospective losses unless
these are specifically insured. (See (Re wright and pole
(1834) .

Case: of (Reyndds and anderson v. phoenix assurance co. ltd

1978).
- the plaintiff had bought in 1969 an old maltings.
- And insured them for
18000 which little more than
the original purchase price.
- The sum insured was increased to 628000 to cover the
probable cost of rebuilding in the event of the buildingg.
- A fire then occurreed which destroyed and a dispute
arose as to the appropriate basis of indemnity.
- The judge outlined three alternative bases.

 Market value.
 The cost or reecting modern replacement building
(around 50000).
 The cost of reinstatement more than 250000.
The court held that the third alternative.

Machinery and equipment:

----------------------------------------
indemnity is generally valued as:
The cost of repair less an allowance for wear and tear or

| P a g e 183
 The cost of replacement less wear and tear if repair is not
possible.

==========================================

the parties may agree if they wish that the policy will
provide either more or less than a strict indemnity.

In the case of less than a full indemnity:

=================================

There are several factors whish may limit the insured’s to a

full indemnity.

 The sum insured or limit or liability

 The insured can not recover more than this amount (sum
insured or limit liability) even where the loss measured by the
indemnity principle is a higher figure.
 An exception to this general rule is sometimes found
liability insurance where (the costs and expenses incurred in
connection with liability claim.

Under insurance and average clauses.

=============================

| P a g e 184
 If the sum insured or limit of indemnity is not large
enough to meet the loss.

 The insured will clearly not obtain a full indemnity.

 This clause can operate as an implied term in the case of

marine insurance only.

 But can not be implied in a fire policy and household

insurance.

Excess or deductible:
==================
• Is a clause which provides that ‘the insured must bear the first
amount of any loss. Either as a sum of money say 250 or a
percentage of the loss e.. 5%.
• This clause are common in many types of policy (including
motor,household) .
• This clause is to relive insurers from having to deal with
small losses.
• This clause may either be compulsory or requested by the
insured. In order to gain a reduction in premium.

Franchise:
========
- Is similar to excess.

| P a g e 185
- There is no liability for any loss, which is less than the
franchise figure.

For example:
Loss of 950 Loss of 1050
Policy subject to Insurer pay nothing. Insurer pay 50
1000 excess the insured will pay
Policy subject to Insurer pay nothing Insurer pay 1050

1000 franchise

| P a g e 186
 Distinguish between:

A) Insurance cover on a reinstatement basis and;

B) Reinstatement as a method of providing indemnity.
4/2001
a) Effectively, this is cover on a new for old basis in respect of
buildings or machinery- the reinstatement clause provides
that insurers will pay for the cost of rebuilding without
making any deduction for wear and tear or depreciation.

b) Reinstatement as a method of providing indemnity :

• It is where the insurers settling a claim by actually rebuilding
instead of paying money.
• This is given in the operative clause of most fire policies and
many other property insurance.
• Insurers may elect to do so under the terms of policy or be
required to do so by virtue of the fires prevention
{metropolis }Act 1774,

Method of providing indemnity:

=======================

The wording of policy will usually give the insurer the right
to choose the method which is most economical to them.

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 There are four methods are given as follows:

 Payment of money:
• If there is no clause in the policy giving the insurers the right
to settle in some other way.
• The insured has a legal right to insist on money payment. (see
Rayner v. perston 1881).
• This method is convenient and satisfactory for both parties.

 Reinstatement:
• It is where the insurers settling a claim by actually rebuilding
instead of paying money.
• This is given in the operative clause of most fire policies and
many other property insurance.
• Insurers may elect to do so under the terms of policy or be
required to do so by virtue of the fires prevention
{metropolis }Act 1774,

The main provisions of the fires prevention {metropolis}Act

1774:
• this act requires insurance companies to lay out the insurance
many as far as it will go towards rebuilding or reinstating
buildings which have been destroyed or damaged by fire.
• There are two circumstances where insurers must do this:
- if they suspect fraud by the insured.
- Upon the request of any person interested in the
buildings.

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 This Act applies:
- to fire insurance of building only;
- to England ,wales and some other countries.
- To policies written by ins. Companies only but not to
policies issued on behalf of Lloyd’s underwriters.

 Repair:
The best known example is motor insurance.
This is more common in continental Europe than in UK.

 Replacement:

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A) What is a valued or agreed value policy?
B) What principles apply when there is a partial loss under
a valued policy? 4/2002
A)

B) Principles apply when there is a partial loss under a

valued policy

 In the case of a partial loss the rule in Elcock v Thomson

1949 may apply.

 In this case a large house was insured under a fire policy

for an agreed value of 106850 although its actual was only
18000 at the time when it was damaged.

 The fire reduced the value of the building to 12600 a

reduction of 30%.

 The court held that the insured was entitled to 30% of

the agreed value- 32055.

 Under the rule the insured is entitled to a proportion of the

agreed value which is equivalent to the degree of depreciation
in actual value caused by the loss.

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 A policy might stipulate that the agreed value clause is to
apply only in the case of a total loss.

 In this case partial losses would be settled according to the

ordinary principles of indemnity.

How does a valued policy differ from a simple contract of

indemnity? In what circumstances might it be appropriate
to write insurance on a valued basis? 10/2003

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 ============================================

12
============================================
State three ways in which a right of subrogation may arise.
Illustrate each one with an example. 10/2002

Subrogation can arise :

• In tort (e.g. . Negligent conducts that causes damage to
property insured under material damage insurance.)
• In contract ( e.g. the terms of a lease ( Damell v.Tibbitts
(1880) or contract of employment
Under statute.

Outline the principle (s) of law illustrated by ONE of the

following cases.

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a) north British and Mercantile insurance co v. London,
Liverpool and Globe Insurance co (1877) the king and
queen granaries case};

b) Commercial Union v.
Hayden (1977).

A) North British and Mercantile insurance co v. London,

Liverpool and Globe Insurance co (1877) the king and queen
granaries case};

Or
b) Commercial Union v. Hayden (1977). Also concerned
contribution.
• Two public policies, one written by CU and one by
Lloyd’s
• With limits of liability of 100 000 and 10000
respectively,
• Were brought into contribution on a claim for 4425.
• Lloyd’s maintained that their liability for the loss (based
on the maximum liability method) was 403 (non-
eleventh).
• CU claimed a contribution of 2212 (one-half) arguing
that the independent liability of each insurer for the

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 loss was 4425 (since the loss fell within the indemnity
limit of each policy) and the insurers should therefore
share the loss equally.
• The decision established that the independent
liability method (not the maximum liability method) is
the proper basis for the calculation of contribution for
liability insurances.
• The court of appeal were influenced by the fact that
the premium of 600 for the Cu policy was little more
than

5.00 for the Lloyd’s insurance.

• Unlike property insurance premium liability premiums
are not calculated pro-rata according to the sum insured
and most liability claims will fall within a low limit.

Provide a simple definition of the doctrine of subrogation.

State two ways in which subrogation may operate in
insurance.4/2000

Definition of the doctrine of subrogation.

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 Is the right of one person having indemnified another
under a legal obligation to do so to stand in the place of that
other and avail himself of all the rights and remedies of that
other whether already enforced or not.

Two ways in which subrogation may operate in insurance:

 If the insured has succeeded in recovering for the same

loss twice the insurers may call upon him to pay back the
profit which has resulted from the double recovery, see for
example Castellain v.Preston(1883)

 If the insured has not enforced his alternative rights to

indemnity the insurers may step into his shoes when they
have indemnified him and pursue the alternative right or
recovery in the name of the insured.

Using an example of each explain how market agreements

may modify the operation of:
a) subrogation;

b) Contribution. 4/2000
a) As regards subrogation,
• Good examples include knock-for knock agreements (now
uncommon in the UK) between motor insurers who agree

| P a g e 195
 to forego subrogation moves against each other and pay
their own damage/losses.
• There are also common law agreements between motor
and employers liability insurers and immobile property
agreements between motor and property insurers.

As regards Contribution.
 A good example is the agreement between motor insurers
whereby the insurers of a vehicle involved in an accident pay
the whole of a liability claim against a driver other than the
policyholder even though the driver may have cover under
the driving other vehicles extension of his own policy.
 Again the insurers may agree to share a loss covered by
two or more policies even though the interests are different
(e.g. where one insured i.e. an owner and the other a bailee).

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 Explain the term subrogation; when insurer exercises its
subrogation rights, in whose name is the action brought?
4/2004

The term subrogation:

Insurer exercises its subrogation rights, in whose name is the

action brought:

 The action must be brought in the name of the insured

and legally it is regarded as the insured’s own name.

 There is one exception to this rule which is actions

brought by insurers under the riot damages Act 1886

 Where the insurers may sue in their own name

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 State four key differences between the doctrine of
subrogation and that of abandonment and salvage. 4/2003

subrogation abandonment and salvage

Confer rights only over the
subject matter itself.
Gives the insurer the right to
pursue a claim against a third
party for the loss of the subject
matter.
Where as an insurer who
accepts abandonment becomes
An action by way of
the owner of the goods
subrogation can not be brought
in the insurer’s own name
(with one exception ) riot
The insurer can make a profit
Where as subrogation allows on the abandonment
the insurer to recover no more
than their own payment.

Subrogation operates Where as abandonment

automatically as a result of the property need not be a
principle of indemnity accepted by the insurer

A) Briefly outline the maximum liability method of

calculating the ration of contribution between two
policies which cover the same loss

| P a g e 198
 b) In what circumstances will the maximum liability
method not work fairly or not work at all.
Maximum liability method:

 Under ` The maximum liability method the loss is

shared by insurers in proportion to the maximum amount
of cover, which is available under each policy.

 Which is normally equivalent to the sum insured in the

case of property insurances.

There are Circumstances where this method will not

operate fairly or not work at all.
• If the terms and conditions of the policies are not the same
the maximum liability meathead will not operate fairly. (One
policy may be subject to an average clause or policy excess.)
• If the range of the two policies is different it will be difficult
to compare property the sums insured.
• If one policy provides unlimited cover the method will not
work at all.

Nature of subrogation
=================

 It is sometimes suggested that subrogation prevents the

guilty party from being ‘let off the hook’

| P a g e 199
 The main purpose of subrogation is simply to prevent
what is known as the unjust enrichment of the insured in
other words to prevent them from unfairly profiting from
their loss.

Indemnity policies only:

==================

 This doctrine (subrogation) does not apply to

nonindemnity contracts such as life or personal accident.

 For example in Bradburn v.Great Western Railway

(1874) as.

 A person who was inured in a railway accident was

awarded damages against the Railway Company. 

The company’s argument, that his claim should be
reduced by the amount of his accident insurance cover
was rejected by the court.

 A life insurance company which pays a claim following

the death of a policyholder who is killed in a road
accident has no subrogation rights against a driver
whose negligence caused the accident.

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The principle (s) of law illustrated by ONE of the following
cases. Yorkshire insurance co ltd.v. Nisbet shipping co ltd.
(1962) 10/2000

Recovery greater than the loss

==========================

 If there is any surplus after the insurers have recovered

their money by way of subrogation the insured is entitled
to keep it: the insurer is not entitled to recover more
than he has paid out

 This situation arose in Yorkshire insurance co ltd.v.

Nisbet shipping co ltd. (1962).

| P a g e 201
 Insurers had paid an agreed value of 72000 for the loss
of a ship in a collision in 1945.

 The insured sued the Canadian Government who had

owned the other ship and damage of 75000 were
awarded.

 This sum was converted into Canadian dollars at the

exchange rate prevailing in 1945.

 However when the dollars were converted into sterling

they produced 126000 because the pound had been
devalued in 1949.

 It was held that the insurers were entitled to 72000

only the sum they had paid out.
=====================

| P a g e 202
 Ex gratia payment:
=================

 What happens if an insurer makes a payment, which

they are not strictly bound to do by the policy terms?

 In fact, subrogation arises only from payments made

under the terms of the policy.

 If the insurers make a payment outside the terms of the

policy.

 Making it clear that no legal obligation to pay is

accepted,

 And that payment is made merely as favour (known as

an Ex gratia payment)

 They are not entitled to

subrogate against a third party.

 The insured is entitled to retain any amounts secured in

this way.

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 What conditions must be satisfied for contribution to arise
at common law? 10/2004

Contribution will arise only where the following conditions

are satisfied:

 Two or more policies of indemnity exist;

 Each insurers the subject matter of the loss;

 Each insurers the perils which brings about the loss; 

Each insurers the same interest in the subject matter; 
Each policy is liable for the loss.

What is the effect of a non-contribution clause in an

insurance policy?
What happens when there is a claim on two insurance
policies that carry identical clauses of this type? 4/2001

| P a g e 204
 There are various types e.g., escape clause, which forbid
the insured from taking out another policy without the
consent of the insurers.

 Other non-contribution clauses, the clause may simply

state that there will be no liability for any loss insured by
another policy.

 These clauses are valid in law and their effect is to push

the loss onto the other insurer.

 Both contracts may have a similar clause so that the

insured appears to have no cover at all.

 The courts have rejected the possibility of the two

policies canceling each other in this way.

 See Gale v. motor union insurance co (1928) and

national Employers; Mutual v hayden (1980)

 Where there is double insurance, non-contribution

clauses will effectively cancel each other out rather than
cancel the cover.

 Each insurer will then pay its rateable proportion of the

loss.

| P a g e 205
 Outline the principle (s) of law illustrated by ONE of the
following cases.

a) north British and Mercantile insurance co v. London,

Liverpool and Globe Insurance co (1877) the king and
queen granaries case};

A common interest:  the leading case is north

British and Mercantile insurance co v. London, Liverpool
and Globe Insurance co (1877)

 Sometimes known as the king and queen granaries case.

| P a g e 206
 The facts of the case were that merchants (Rodocanachi)
had deposited grain which was their property at a
granary owned by wharfingers (Barnett).

 The wharfingers as bailees had insured the grain for

which they were strictly liable by custom of trade. 

The owners too had insured.

 The wharfingers insurers paid a claim following damage

to the grain by fire and sought to recover from the
owner’s insurers.

 They failed to do so because the interests insured by the

two policies were different.\

 The wharfingers as bailees were liable in law for the loss

and their insurers obliged to bear it in full.

Finished

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