INSURANCE PRINCIPLES

Ø The following are the essential features of a valid contract:

·        Offer and acceptance-one party makes an offer accepted unconditionally by the other

·        Consideration-a contract must be supported by a consideration in order to be valid. Premium is the insured’s consideration.

·        Capacity to contract – individuals are said to be competent to enter into a contract if the are:

§  Of the age of majority (age 18 );

§  Of sound mind; and

§  Not disqualified, buy law, from entering into contracts

·        Any contracts entered into by people not competent to contract will be null and void.

·        Consensus ad idem- in simple terms: both parties to the contract must understand and agree upon the same thing, in the same sense.

·        Legality of object or purpose- the objective of both the parties to the contract should be to create a legal relationship.

·        Capability of performance- the contract must be capable of being performed by both the parties.