Contract Law – Exclusion Clauses

Contract Law – Exclusion Clauses

Konrad, who resides in Hobart, decides to take his family to Bruny Island for the day. Arriving at the ferry (which he has often used before) he is given a ticket on paying his fare. On the reverse side is written:

“All vehicles and passengers use this ferry at their own risk”

He does not read these words nor does he see a notice on the ferry itself that has identical wording. Due to negligent navigation by its captain the ferry collides with an underwater obstruction marked by a warning buoy. The ferry sinks slowly enough for all passengers and crew to be rescued but the ferry and vehicles on it are lost.

Can Konrad sue the ferry company for the loss of his car?

Contract Law – Constructing the Contract

Farmer Bob goes to the market to auction his calf. On the morning of the sale, before the commencement of the proceedings, Farmer Joe is examining the calf when Farmer Bob comes up to him and says “I had her examined by the vet last week and he says there’s nothing wrong with her, She is as sound as a bell.” Farmer Joe stops his examination and in due course purchases the calf at the auction. A term in the auction conditions of sale reads:

“No warranty is given as to the quality of any animal”

It is true that the vet last week pronounced the calf in good health. Unfortunately the vet was wrong; the calf has tuberculosis and dies a weeks after the sale. Does Farmer Joe had a remedy for breach of contract?

Contract Law – Offer and Acceptance

Smith wrote a letter to Jones saying “I would like to buy your Rolls-Royce for $20,000, $5,000 to be paid on the day of sale and the balance in two months.” Jones replied, saying, “I wouldn’t take less than $24,000. If you want it let me know quickly, as there is someone else after it.

Smith tried again, this time offering $22,000, $5,000 up front and the balance in two months. Jones replied “I am quite agreeable to your terms, viz, $5,000 up front and the balance in two months, but I still don’t care to take less than $24,000. If you accept my offer let me know at your earliest convenience, as I still have someone else interested.” On the same day Jones wrote to Crump, offering to sell him the Rolls for $25,000. The next day he received similar replies from Crump and Smith, which both read: “Accepting your offer”. Jones sold the Rolls to Crump (of course).

Do you think Smith should have a remedy against Jones because he did not get the Rolls?
INSURANCE LAW – REVISION QUESTIONS

QUESTION 8 Brett, a university student studying accounting, is totally dependent on his father for financial support. He is not eligible for Austudy because the family income is too high. Brett insured the life of his father for $500 000, payable upon his death. During the second year of his course, his father died. When Brett claimed on the insurance policy, the insurance company refused to pay, claiming:
Brett misstated his father’s age as 49 when in fact he was 45.
Unknown to anyone in the family, Brett’s father had contracted HIV after a blood transfusion. This fact only became known after an autopsy had been completed into his death. Discuss whether the insurer can reject Brett’s claim, indicating in your answer the type of policy that Brett is most likely to have taken out.

Where Brett has overstated his father’s age by four years the insurance company cannot avoid the policy. They can either increase the sum insured on a proportionate basis or reduce the premiums payable and repay the overpaid premiums with interest.

Where illness is unknown to anyone, including the father, there is no question of non-disclosure arising. The insured’s duty is to disclose all material facts which are known to them. Where the insured takes out insurance but is unaware of the true situation, the court held in Lindsay v CIC Insurance Ltd (1989) that the matters that are required to be disclosed are those matters which are known to the insured or their relevant agent. While material facts include the health of the proponent, if the proponent is unaware of a problem and the insurer doesn’t seek a medial examination as a matter of right for a life policy, then the insurer will not be able to avoid the contract.

QUESTION 9 The directors of Twenty-First Maylux Pty Ltd were a husband and wife who ran a gift shop. Insurance was taken out on the gift shop in the name of the company, through an insurance broker with Cover-All Insurance Ltd. While the proposal form didn’t contain any questions as to prior convictions, the husband had previously entered into insurance contracts where the proposals had contained questions about prior criminal convictions. The husband had a criminal record for drug offences. A fire occurred on the premises and the directors claimed on their insurance policy with Cover-All Insurance. What defence will the insurance company raise, and do you think it will be successful?

This question is concerned with the effects of non-disclosure on a policy of general insurance.

Insurance contracts are contracts of the ‘utmost good faith’. This is because the parties are not in an equal position with respect to knowledge of the possible risk involved. The person with the greatest knowledge of the risk is the proponent and it follows that they should have to disclose all those facts which could influence the insurance company as to whether it will accept the risk or not.

The test of what is material is the ‘reasonable insured’ test. That is, the insured must disclose matters to the insurer which they know or which a reasonable person in the circumstances could be expected to know, are relevant to the decision of the insurer whether to accept the risk and, if so, on what terms.

Facts which could be considered to be material include the previous insurance loss history of the applicant, whether they have a criminal record and whether they had been refused insurance before.

The question for consideration here is whether the husband’s criminal record was relevant to Cover-All Insurance and if it had been disclosed, whether they would have accepted the proposal. In Twenty-First Maylux Ltd v Mercantile Mutual Insurance (Australia) Ltd (1990) VR 919, upon which the facts of this question are based, the court considered that the criminal record of the husband was relevant and that if it had been disclosed the company would not have accepted the policy. The husband knew that the criminal conviction was relevant to the insurer as it went to the question of risk and the non-disclosure was fraudulent.

The insurance company will raise the same defence as in Twenty-First Maylux. That is, that the conduct of the husband in not disclosing that he had a criminal record was a fraudulent breach of his duty to disclose, thus allowing the insurer to avoid the contract.
(Note: Twenty-First Maylux Ltd v Mercantile Mutual Insurance is not in the text.)

QUESTION 10 Brown has just bought a printing business at Ultimo. He has come to you, as the family accountant, for advice on whether to take out insurance. Ultimately, he will seek more detailed advice from an insurance broker, but at this stage he is interested in obtaining some general information about insurance and the different types of policies that you think he should consider for his new business venture. He has provided you with the following information:
He has a wife and two children (a girl aged nine and a boy aged seven).
He is renting a house at Sylvania Waters, as his previous house at Oyster Bay was burnt to the ground in a 2008 bushfire.
He is leasing a factory at Hurstbridge.
He is leasing a number of vehicles for the business.
He owns a 2000 Holden Statesman car valued at $45 000 but which cost him $55 000 when he bought it.
He employs 15 staff.
He has plant and equipment valued at $750 000 and trading stock valued at $250 000 in the printing offices at Ultimo.
He is owed $250 000 by debtors.
He owes creditors $25 000.
One of his employees has been involved in two accidents in the last two weeks. One occurred while he was driving a company vehicle to deliver stock to a client, and the other occurred when the same employee accidentally dropped a box of printing paper on a customer who was walking through the printery.

Advise Brown on the following matters:
a The reasons for and against him taking out insurance.
b What types of insurance you would advise him to consider taking out (explaining why).
c What information he should disclose to the insurance company, if any, if he decides to take out insurance (explaining why).
d What terms you think he should be aware of in insurance law that would help him better understand what insurance is and how it operates.

a) Some of the advantagesassociated with insurance include:
• The primary reason for taking out insurance is to transfer the risk of loss from one person, who may not be able to afford the cost of a loss, to an insurer who represents a large group of people and who can afford the loss. That is, security.
• To minimise the risk of future losses in the day-to-day running of his business.
• Taxation benefits.
• In the case of life insurance, to plan for retirement and/or his death so that his family are guaranteed financial security.

Some of the disadvantages associated with insurance include:
• The cost of the premiums for what may be no return if a claim on the policies is never made.
• On life insurance policies which contain an investment element, there is a relatively low return compared with what could be achieved if the premium was invested elsewhere.

b) Brown should consider taking out the following policies, though the cost of premiums will be a major consideration in whether he can afford them all:

• Home contents insurance for his possessions in the house that they are renting.
• One of the main types of life insurance to provide for his family in the case of his death.
• Personal accident, disability and sickness insurance to provide an income flow in the event of his sickness or an accident.
• Key person insurance if he has any employees whose services are particularly vital to the business.
• Certainly extended third party motor vehicle property insurance, and preferably comprehensive motor vehicle insurance at least for the vehicles he is leasing. The lease repayments continue irrespective of the condition of the vehicle.
• He should already be taking out workers’ compensation for all his employees because that is compulsory by law.
• Superannuation should also be paid for his employees as that is also compulsory.
• Fire insurance for the contents of the building he is leasing.
• Business interruption or consequential loss insurance in case of disruption to the business following damage caused by an insured peril—for example, fire. A fire policy does not cover loss of profits, only damage caused by fire.
• Credit insurance would be worth considering because of the large amount owed by debtors.
• Products liability insurance may be worth considering if Brown is a manufacturer and wishes to obtain protection against losses arising out of defective products.
• Public liability insurance for protection against personal injury or property damage to third parties by Brown’s operations.
• A form of all risks insurance to cover plant and equipment, and stock from theft or damage.

c) Brown is going to have disclose those matters which are going to be relevant to whether the insurer should accept the risk, and if so, on what terms, a reasonable person could be expected to have known to be relevant to the insurer’s assessment of the risk. This could include:

• That his previous house was burnt down in a bushfire. This is material to the insurer when it comes to consider whether to insure him for the factory as it assists the insurer in deciding whether to accept the insurance, and if so, at what rate of premium.
• That he is renting a house, is leasing a factory and vehicles, is owed $250 000 but has $750 000 of plant, equipment and stock and owns his own car is material because this goes to risk. His financial position is important because a person who is in a financially secure position is less likely to make a fraudulent insurance claim than one who isnot, and this goes to risk and in turn the premium if the insurance proposal is accepted.
• The two accidents are both material. A driver with a poor driving record is a higher risk than a driver with a good driving record and so the premium will be affected accordingly. Similarly, a record of accidents, such as equipment breakage, would suggest the potential for claims, and insurers would want to adjust their premiums accordingly.
• The type of business and that he is employing staff. The type of business will tell the insurer whether it is low, medium or high risk and is material in determining whether the insurer will accept the insurance and at what premium. The number and type of staff are also material to the risk.
• That he is married with children. This is material to risk and the premium. Marriage and children suggests stability and a lower likelihood of criminal activity.

d) An insured needs to be aware of the following terms:
• Cover note: an interim contract of insurance pending the acceptance or decline of a full contract of insurance.
• Indemnity: protection against loss, usually provided by way of contract of insurance.
• Insurable interest: the pecuniary interest that the insured has in the subject matter of the insurance. It signifies the benefit the insured will gain from the preservation of the subject matter insured or the detriment they will suffer from its loss.
• Insurance: a contract whereby a person called the insurer agrees in consideration of money paid to them (the premium), by another person called the assured, to indemnify the latter against loss resulting on the occurrence of a specified event. It refers to terms based upon a risk or contingency.
• Insured: the person covered by an insurance policy.
• Insurer: the person who contracts, for a premium, to indemnify another against losses. Also called an assurer.
• Premium: the price payable for a contract of insurance.
• Subrogation: the substitution of one person or thing for another so that the same rights and duties which were possessed by the original person are transferred to the substituted one. For example, an insurer is generally subrogated to the rights of the insured on paying their claim.
• Duty of disclosure (uberrimaefidei: in the utmost good faith.) The parties under an insurance contract have a legal obligation to disclose anything which is material to the risk.
PRACTICE QUESTIONS
T3/2012

Tort Law – Negligence

(a) Gummidge, a farmer, hired out two of his fields to a charity, the Hyenas Protection Fund, to hold a funfair to raise money for the charity. The Protection Fund in turn arranged among other attractions for Frank’s Frolics Ltd to set up a roller-coaster. Angela, aged 12, and a friend paid for admission to the roller-coaster and took their seats. Basil, aged 14, climbed over the guard rail to the roller-coaster without paying an entry fee. At that moment, Clive, the operator of the roller-coaster and employee of Frank’s Frolics, started the machinery for the roller-coaster without noticing Basil.
Basil leapt forward into the nearest carriage and landed on top of Angela. However he lost his balance, fell off and was seriously injured when he became trapped between the carriage and the platform. Angela is a delicate child with brittle bones and she also was seriously injured.
Advise Angela and Basil.

(b) Fred and George, both slightly affected by drink, left a party at their golf clubhouse. Fred pointed to a motorised golf buggy and said, “Let’s get ourselves home on that.” They both clambered on to the buggy. As they reached the gate of the golf club, Harriet, wearing dark clothing, rode her bicycle without lights into the golf club. The buggy and the bicycle collided.
The buggy fell over, trapping George’s leg. Harriet was knocked off her bicycle. Irene and Janet, who were leaving the party on foot, ran forward across the golf course to assist. Irene was wearing shoes with very high heels. She stumbled on a tree root and fell over. Janet reached the scene of the accident and tried to lift the buggy to release George’s leg. It was heavier than expected and she experienced a searing pain in her back.
George, Harriet, Irene and Janet have all suffered personal injuries and have been off work for several months.
Advise as to any potential actions in negligence that George, Harriet, Irene and Janet.

 

TORT LAW – NEGLIGENT MISSTATEMENT

(a) Briefly outline the law relating to negligence
(b) Outline the law relating to negligent misstatement and how it currently impacts on professional advisers.

Business Structures

(a) Compare and contrast the features and advantages of a partnership with a company as a way of carrying on a small business.

(b) Outline the main features of a corporation

 

 

ORDER THIS ESSAY HERE NOW AND GET A DISCOUNT !!!

 

 

You can place an order similar to this with us. You are assured of an authentic custom paper delivered within the given deadline besides our 24/7 customer support all through.

 

[order_calculator]