Principles of Contract Law

Insurance Principles and Policies: Principles of Contract Law

• Contract Law is a legal framework that governs agreements whether they are oral or written by two or more parties.

• A contract is a legally enforceable arrangement or agreement between parties each with obligations towards the other.

• There are four essential elements that constitute a valid contract: an offer, acceptance, consideration, and intention to create legal relations.

Offer and Acceptance

• Offer is a statement of terms which the person making it, the offeror, is prepared to be contractually bound to.

• For a contract to exist, the acceptance must exactly match the offer. If the acceptance alters the terms in any way, it is not an acceptance but a counter-offer.

Consideration and Intention

• Consideration is the value promised to convince a party to agree the contract. It can be money, a service, or anything else of value.

• The intentional creation of legal obligations or an intention to create legal relations must be present for a contract to be legally binding.

Types of Contracts

• A unilateral contract is a contract where only one party makes a promise or undertakes a particular performance.

• A bilateral contract involves mutual promises, each party is both promisor and promisee.

Breach of Contract and Remedies

• Breach of contract refers to a failure to perform one’s duties under the contract.

• Remedies available for breach vary and may include damages to reimburse financial loss, specific performance to compel the contract to be fulfilled, or rescission which involves reversing the contract.

Don’t forget to link your knowledge of contract law principles to real-life scenarios and case studies. Consider how the principles form the basis of insurance contracts and the implications for both insurers and policyholders.