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Content 3
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Law of contract
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Law of Contracts
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Law of Contracts
A has invited his friend B to have lunchwith him in his (A) house. B accepted
the offer . But he(B) could not attend thelunch at that time. Such a breachcommitted by B is not actionable becausethere was no intention to create legal
obligation. Rather it was only a socialagreement
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Law of Contracts
,
,
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Simple Contracts,
Simple Contract means :
Simple by nature (Not very formal)
These are not required to be signed, sealedand delivered
May be in writing or words of mouth (orally)
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Simple Contracts (Contd)
Essential
Elements
Unrevoked offer
Unqualified acceptance
consideration
Consensus ad idem
Capacity of the party
Legality of the object
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Simple Contracts (Contd)
1. Unrevoked offer:
there must be an unrevoked offer from the offerer, which offer is left tobe accepted by the offeree. The offerer has the right to withdraw hisoffer before it is accepted. Sometimes a time limit is attached with theoffer within which the acceptance must be made.
2. Unqualified Acceptance:
There must be an acceptance of offer is made and that acceptancemust be unqualified. A qualified acceptance is noacceptance and it isactually a counteroffer made by the other party.
Illustration of unqualified acceptance
A offers his car for sale for tk.500,000 to B. If B accepts that price and
doesnt make any change in that offer, then this is an unqualifiedacceptance. On the other hand, if B makes a counter offer to buy the carfor tk450,000 ,then there is no unqualified acceptance of the original offer.
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Simple Contracts (Contd)
3. Consideration:
consideration may be defined as some right, benefit, profit oradvantage accruing to one party or some loss, detriment orresponsibility suffered or undertaken by other.
Illustration of considerationIn insurance contract, the insured (one party) pays the premium as
consideration of the contract that passes to the insurer (other party).And in consideration, the insurer promises to pay claim that passes tothe insured.
4. Consensus ad idem:
the parties to the contract must be of the same mind as to the proposedcontract. They must agree to same thing in the same sense.
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Simple Contracts (Contd)
5. Capacity of the party:
the parties must have the legal capacity to enter into a contract. Minorsdo not have any capacity to enter into contracts, unless the contractrelates to necessaries for life. Persons of unsound mind and personswho have been disqualified by law also do not have any capacity toenter into contracts.
6. Legality of the object:the subject matter of the contract must be legal. Otherwise the contractmay be void or illegal. Normally a contract will be valid provided
it is not barred by law
Does not injure the person or property of another
Does not impair the provision of any law
Does not go against the public policy
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Specialty Contract
The specialty contract is a contract which must be,
Example: Gratuitous promises, transfer of land etc.
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Difference between simple contracts and specialty
contracts
Subject of difference simple
contracts
specialty
contracts
Doctrine of estoppels
(evidence to support
the statement)
Not applied Applied
Consideration Must be
present
Need not to be
present
Stamp duty Not required Required
documentation Not needed Must be needed
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CONTRACT OF RECORD
It refers torecords kept
in courtsarising out
ofjudgments
It is not
contract inlegal sense.Contract of Record
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Contract of Insurance
A
There are two parties: Insurer andInsured
B Have a consideration called
premium
C Insurer promises to indemnify the
insured against financial losses
A contract is called a contract of
insurance
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SUBJECT MATTER OF INSURANCE
Subject matter of Insurance.Property, life , limb or liability
On the other hand,
Subject matter of Insurance contract.
The legal financial interest of a personin that Property, life , limb or liability
(subject matter of insurance)
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Difference between insurance and wagering:
subject Insurance wagering
Types Valid contract Void contract
Utmost good faith Required Not required
Repetition of
Insured Events
May or may not take
place, May take placemore than once
(except life)
Definitely take place
only once
Insurable interest Required Not required
Indemnity Applied Not applied, the
person winning gets
back his stake
Immunity from loss Known as to which
party is immune
Not known which
party is going to win 16
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Encompassing the transfer of rights held by one party the
assignor- to another party assignee
Assignment
In short..
In broad sense..
A situation whereby an original party to the contract is changedand replaced by another so that another shall now becomeentitled to all benefits and in the same way be subjected to allobligations as per original contract.
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There are two point of view regarding the subject of assignmentin insurance
Assignment(Contd)
Assignment of policyproceeds only
Assignment of policy
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Assignment of policy proceeds
Features
Unalteredinsured,insured
remain thesame
Policyproceeds is
assigned tothird party
Fulfilment ofterms &
obligationsremains to the
insured He still remainsas insured anda party to the
contract
Notassignment in
true sense
Assignment(Contd)
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Assignment of policy
Features
Original
insured isreplaced
Transfer of rightsand obligations
under the originalcontract
Different rules areapplied as the parties tothe contract is changed
along with shifting ofrights and obligations
Assignment in
true sense
Complexformat
Assignment(Contd)
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Fire insurance
This type of insurance is not assignable because of being personalinsurance
Personal integrity of the insured of insured influence the decision ofthe insurer
There is no guarantee of accepting the new insured by the insurersfor the continuation of contract
If there is any change in ownership, it must be communicated to theinsurer
Assignment(Contd)
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A i t(C td)
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Assignment(Contd)
Marine insurance
Marine insurance are freely assignable as per Marine Insurance Act
No personal element is involved in this insurance
Different consideration applies to cargo and hull insurance
Regarding cargo insurance there is no bar in overseas trade
Policy is to be assigned at the time of sale of cargo
Assignment may or may not bear the name of the assignee
Assignment is restricted in HULL policy because of personal matter
So it becomes Novation and not assignment
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Assignment(Contd)
Life insurance
Assignment of policy proceeds is possible in life insurance
The life insured remains the same
The assignee could not have any insurable interest on the lifeassured
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Classification of insurance.....
Classification ofinsurance
Branch wiseclassification
Subject matterwise
classification
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Classification of insurance.....
Branch wiseclassification
Marine
Fire
Life
Accident
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Domain of marine insurance
Hull Meaning the insurance of ship
Cargo
Meaning the insurance of goods
being conveyed
freight
Meaning the insurance of the
consideration, subject matter for theconveyance of goods
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Domain of fire insurance
loss
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Domain of life insurance
Life insuranceOrdinary life
insurance
Industrial life insurance
Annuity
Group life insurance
Personal accidental
accident
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Domain of the insurance of accident
Accidentalinsurance
Personalaccident burglary
Motor
Employersliability
Publicliability
Product liability
Cashsafe andtransit
Cropinsurance
Creditinsurance
Etc
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This is important to know that accident department isstill an open department and any new type of policywhich will not appropriately come under marine, fire,
and life will be treated under accident department.
An information that has extra focus
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Domain of subject matter-wise insurance:
Subject matter wise
Insurance of person
Insurance of property
Insurance of liability
Insurance of liability
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Property insurance
Propertyinsurance
Property insurance mainlycovers property or materials
damage
against unforeseen risk tosecure relevant property
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Property insurance
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Property insurance
Classification ofproperty
insurance
Fire insurance
Marine insurance
Engineering insurance
Motor insurance
Aviation insurance
Livestock insurance
Crops insurance
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Property insurance ( contd)
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Property insurance ( cont d)
Types of marine policies
There are usually five types, on the basis of which marine policycan be issued. Those are:
1.Time policy: Duration of the policy cover the time factor isimportant here. The subject matter of insurance is normallycovered for a year whatever might be the number if voyagewithin that year.
2. Voyage policy: The policy covers a particular voyageirrespective of the time factor
3. Mixed policy : to settle the problem caused in time and voyagepolicy a policy has been introduced which is called mixed policy
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4. Floating policy: this type of insurance has been introduced to
save the difficulties of merchants in effecting numbers ofpolicies for each time of shipment, a floating policy may beissued for a round sum covering the numbers of anticipatedshipment.
5. These types of policies are issued in respect of ships whilst inthe process of erection or building at dockyard
Property insurance ( contd)
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P t i ( td)
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Subject matter of insurance
1. Hull : this refers to the ship, that is to say, hull and machineryof the vessel. The ship owner can insure it against probablelosses as such.
2. Cargo : this refers to goods or merchandise that are being
imported or exported.3. Freight: this is the consideration payable to the ship owner in
respect of carriage of goods by the owners ship.
Property insurance ( contd)
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SCOPES OF FIRE
INSURANCE3
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Fire insurance issues the policies that
provides protection against financial losses
arising out of the operation of fire or certainother specified perils.
The subject matters of fire insurance areusually:
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The scope of fire insurance may be considered under twobroad heading, viz
.
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Under this heading various types of policies
are effected & these are:
Standardfire policy
Specialperils
insurance
Declaration policy
Blanketpolicy
Reinstatementpolicy Building
in courseof
erection
Households
policies
Sprinklerleakage
insurance
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- Used foralmost alltypes of fireinsurancecovers.
- Standardizedfor providingcertaincommon typescover requiredby all.
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whether or not there is any fireinvolved.
of boilers or of gas used fordomestic purpose only eventhough no fire is involved.
whether resulting from explosion or otherwise,
but not happing through:
i) Its own spontaneousfermentation orheating or its
undergoing anyprocess involving the
application of heat.
ii) Earthquake, riot civil
communication, war, invasion,act of foreign enemy, civil war,
rebellion, revolution,insurrection, hostilities, military
power or usurped power.
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Policies cover the losses for additionpayment which losses are excluded
by the standard fire policy. These
perils are :
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If , # actual premium > provisional premium paid,
then the balance is demanded from the insured
&
If , # actual premium < provisional premium paid,
then the balance is refunded.
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these policies are aimed at
simplifying complex fire risk.
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CONSEQUENTIALLOSS INSURANCE3
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CONSEQUENTIAL LOSS INSURANCE
A Policy primarily aims at providing protection against
loss of revenue or loss of earning during this inevitableperiod of interruption of the business caused by materialsloss due to fire.
(Loss Of Profit Insurance)
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COVER PROVIDED:
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COVER PROVIDED:
1. Loss of earning, which is usually measured by net profit.2. Standing charges, which are still required to be uncured by the
insured even thought the business has been interred.
Examples of such expenditures are,
Taxes,
Electricity,
Rent,
Telephone bills
Auditors fee
Salary,
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COVER PROVIDED:
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COVER PROVIDED:
3. Extra expenditures incurred by the incurred with the soleobject of minimizing loss of earning or loss of revenue during
the interruption period.
For example,
The insured may hire premises for a temporary period .
The purpose of the expenditures is to reduce the
Ultimate liability under the policy. . . . .
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Accident Insurance:
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Accident Insurance:
Any policy that does not appropriately come under marine, fireor life shall come under accident department. The policies,
which fall within the scope of property insurance, will bediscussed here.
Policies
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Clissification of Bulglary
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Burglary (BusinessPremises) insurance
This policy aims atproviding cover in respectof the property of business
premises.
Burglary (Privatedwelling) insurance
This policy aims at providingcover in respect of loss ofcontents in a private dwelling
house or the building itself.
Clissification of BulglaryInsurance
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Clissification of Bulglary
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Clissification of BulglaryInsurance
All Risks Policy
This type of policy affords avery wide protection withregard to valuableproperties.
Cash in safe and transit
The policy aims at providingprotection when the moneyis subjected to theft orrobbery.
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Privatecars
Commercial
Vehicles
MotorCycles
Agricultural
Vehicles
Types of Motor
Vehicles
policies
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Contractors All
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Contractors AllRisk
EngineeringInsurance
The policy aims at covering theentire contract work includingconstruction, materials, plants,equipments, machineries etc.
This type of insuranceembraces, steam boilers, lifts,hoists, cranes, electrical plantsengines, refrigeration plants
etc.
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Glass
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Insurance
The policy providesprotection to the insured inrespect of loss or damageto his crops.
This type of policy provides cover inrespect of accidental damage orbreakage of all types of glasses incommon use.
CropInsurance
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Aviation Insurance
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Insurance of pilots, crews and
ground staffs for personal accident.Insurance of pilots against loss of
professional licenses.Loss or damage to cargo carried.Loss of use of the aircraft following
an accident
This insurance basicallyrelates to cattle and horsesand provides protectionagainst loss of animalscaused by disease oraccidents.
Aviation Insurance
Live-stockInsurance
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WAR-RISK
INSURANCE
3
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War
Insurrec
-tion
Invasion
Rebellion Hijacking
Massdestructio
n
Hostilities
Militaryor usurpe
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WAR-RISK INSURANCE
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MARINE INSURANCE
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FIRE INSURANCE
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FIRE INSURANCE
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LIABILITY 3
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LIABILITY
INSURANCES..
3
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ACCIDENTliability policy
Different accident liability policies are
Employers Liability Insurance Public Liability Insurance
Product Liability Insurance
Professional Indemnity Insurance
Motor Insurance
Aviation Insurance
(Basically coversliability)
(Partly covers liability)
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EMPLOYER,SLIABILITY INSURANCE
Employers liability policies aredesigned to the employer (insured)in respect of the legal liabilities thatmight devolve on him arising out of
accidental death or bodily injury tohis employees in course of work.
Employers Liability Insurance:
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p y y
Occupationaldiseases,
Totally or partiallyincapacitating
Public Liability Insurance:
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y
Wide range of policies is available in the market.
Accidental death or bodily injury to third party (includingillness or disease), not being persons in his employment,due to the negligent act of the insured or for which he isresponsible
Accidental damage caused to the property of the thirdparty due to the negligent act of the insured or for which heis responsible.
Product Liability Insurance:
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y
These types of policies are applicable in following
cases In respect of the legal liabilitiesof the manufacturers andsuppliers
Cosmetic manufacturers,
Electrical appliancemanufacturers
Hospital and machinerymanufacturers
Motor Insurance:
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For the purpose of providing cover in respect of own-damage, covers are also provided in respect of legal
liability of the insured arising out of.
Accidental damage caused to property of third
party.
Death and bodily injury to third party
Aviation Insurance:
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Accidental death and bodily injury to third
parties,Damage caused to the property of third
parties
Death and bodily injury to passengers andtheir properties, and
Loss or damage to cargo.
In a concise view.
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Insurance contract is a contract with allrequired formalities.
Because of human attitude the necessityof insurance contracts is increased
All insurance contract s are
classified in specific group.Every new or unexpected events haschance to be included in insurance groupaccording to their nature.
Insurance contract of specific groupprovides specific facilities to the specificperson
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