ESSENTIALS OF GENERAL

CONTRACT
 According to section 2(h) of the Indian Contract Act
1872, “An agreement enforceable by law is a contract”
 A contract, therefore, is an agreement the object of
which is to create legal obligation i.e. a duty
enforceable by law.
 Thus there are two main elements
 I An agreement
 II Legal obligation i.e a duty enforceable by law
 An agreement comes into existence when one party
makes a proposal or offer to the other party and that
other party signifies his ascent (i.e. gives his
acceptance)
 An agreement to become a contract must give rise to
a legal obligation i.e. , a duty enforceable by law.
 To be enforceable by law, an agreement must possess
the essential elements of a valid contract as contained
in section 10.
 Essentials of a valid contract
 Offer and Acceptance
 Intention to create legal relationship
 Lawful consideration
 Capacity of parties
 Free consent
Coercion
Under influence
Misrepresentation
Fraud
Mistake
 Lawful object
 Writing and registration
 Certainty
 Possibility of performance
 Agreement not declared void
 Kind of Contracts
Classification according to enforceability
 Valid Contract
 Voidable Contract
 Void Contract
 Un forceable contract
 Illegal or unlawful contract
Classification according to the mode of creation
 Express contract
 Implied contract
 Constructive or quasi contract
classification on the basis of extent of execution
 Executed contract
 Executory contract
 LIFE INSURANCE CORPORATION
ACT, 1956
 The life insurance corporation Act, 1956 is an act
 to provide for the nationalisation of life insurance
business in India
 to provide for the regulation and control of the business
of the Corporation.
 Important Definitions
 Appointed day
 Composite insurer
 Controlled business
 Corporation
 Insurance Act
 Insurer
 Member
 Prescribed
 Tribunal
 Characteristic features of an
Insurance Contract
1. Insurable interest
2. Contract of ‘Uberrimae fidei’ or Contract of Utmost good
faith
3. Indemnio
4. Mitigation of Loss
5. Causa proxima
6. Subrogation
7. Contribution
8. Re-insurance
9. Double insurance
10. Nomination
11. Assignment
 Insurable interest

 A person can enter into a contract of insurance only

when he has some insurable interest on the life or
property which is insure
 Thus, a person cannot take insurance for an
unconnected property or for an individual with whom
he has no connection as there is no insurable interest.
 Contract of ‘Uberrimae fidei’ or
Contract of Utmost good faith

 Both the parties to the contract, that is the insured and

the insurer have to disclose all the facts connected
with the insurance contract.
 Non-disclosure of facts or declaration of false
information will make the contract null and void.
 Indemnio

 Life insurance is different from contract of indemnity.

It is a contingent contract where the event death is
certain to take place but it is a question of time.
 Hence, the insurance company cannot guarantee
against death or prevent death but can agree to pay a
stipulated sum in the event of death happening at an
earlier date than agreed upon.
 Mitigation of Loss

 Though insurance aims at minimizing the loss, it is

expected that every party to the contract of insurance
should take adequate steps to minimize the loss.
 Causa proxima

 The cause for the accident should be a direct cause for

which an insurance is taken and it should not be a remote
cause.
 In other words, the insurance company will pay
compensation to the insured only when the cause of
accident is directly related to the loss.
 If the loss is the result of two causes, one must look into
the nearest cause and ascertain whether that cause is
insured.
 Only then the insurance company will pay compensation
for the loss.
 Subrogation

 Subrogation means stepping into the shoes of another

person.
 When the insurance company pays full compensation
to the insured, it takes over the ownership of the goods
insured and will enjoy complete right of taking
necessary legal steps to claim compensation from such
persons who are responsible for the loss suffered.
 Contribution

 Under the doctrine of contribution, when an insurance

company compensates the insured, it will be
indemnified by the other insurance company to the
extent of the policy taken by insured.
 Re-insurance

 When an insurance company insure with another

insurance company, it is called re-insurance.
 Here, the original insurer becomes insured when he
insure with another insurance company.
 Double insurance

 When the insured insure with more than one

insurance company, it is called double insurance.
 However, the insured cannot get more than the actual
value of the loss in case of damage to the property
insured.
 Nomination

 In life insurance policy, there will be nomination by

which the insurance company is instructed by the
policy holder to pay the policy amount in the case of
death to that person whose name is nominated at the
time of taking the policy. The nomination can be
altered later.
 Assignment

 A policy can be assigned to a creditor as a security for

the loan obtained.
 Once a policy is assigned, the nomination gets
cancelled.
 When a policy is assigned, the same is informed to
the insurance company and in the case of accident or
loss of life, the policy amount is payable only to the
creditor to whom the policy is assigned (assignee)