Warranties that are mentioned in the policy are called express warranties. Certain warranties are not mentioned in the policy. These warranties are called implied warranties. Warranties which are answers to the question arc called affirmative warranties.
The warranties fulfilling certain conditions or promises are called promissory warranties. Warranty is a very important condition in the insurance contract which is to be fulfilled by the insured.
On the breach of warranty, the insurer becomes free from his liability. Therefore insured must have to fulfill the conditions and promises of the insurance contract whether it is important or not in connection with the risk. The contract can continue only when warranties are fulfilled. If warranties are riot followed, the contract may be canceled by the other party whether the risk has occurred or not or the loss has occurred due to other reasons than the waiving of warranties.
However, when the warrant is declared illegal, and there is no reverse effect on the contract, the warranty can be waived. Proximate Cause The rule; is that immediate and not the remote cause is to be regarded.
The maxim is sed causa proximo non-remold-spectator ; see the proximate cause and not, the distant cause. The real cause must be seen while payment of the loss. If the real cause of loss is insured, the insurer is liable to compensate for the loss; otherwise, the insurer may not be responsible for a loss.
Proximate cause is not a device to avoid the trouble of discovering the real ease or the common sense cause. Proximate cause means the actual efficient cause that sets in motion a train of events which brings about result, without the intervention of any force started and worked actively from a new and independent source. The determination of real cause depends upon the working and practice of insurance and circumstances to losses. A loss may not be occasioned merely by one event.
There may be concurrent causes or chain of causes. They may occur in a sequence or broken chain. Sometimes, certain causes arc excepted by the insurance contract and the insurer is not liable for the accepted peril. The efficient cause of a loss is called the proximate cause of the loss. For the policy to cover the loss must have an insured peril as the proximate cause of the loss or also the insured peril must occur in the chain of causation that links the proximate cause with the loss. The proximate cause is not necessarily, the cause that was nearest to the damage either in time or place but is rather the cause that was responsible for the loss.
Determination of Proximate Cause If there is a single cause of the loss, the cause will be the proximate cause, and further, if the peril cause of loss was insured, the insurer will have to repay the loss. If there are concurrent causes, the insured perils and excepted perils have to be segregated.
The concurrent causes may be first, separable and second, inseparable. Separable causes are those which can be separated from each other. The loss occurred due to a particular cause may be distinguishing known. In such a case if any cause, is excepted peril, the insurer will have to pay up to the extent of loss which occurred due to insured perils.
If the circumstances are such that the perils are inseparable, then the insurers are not liable at all when there exists any excepted peril. If the causes occurred in the form of the chain, they have to be observed seriously. If there is an unbroken chain, the excepted and insured peril has to be separated. If an excepted peril precedes the operation of the insured peril so that the loss caused by the latter is the direct and natural consequence of the excepted peril, there is no liability.
If the insured peril is followed by an excepted peril, there is a valid liability. If there is a broken chain of events with no excepted peril involved, it is possible to separate the losses. The insurer is liable only for that loss caused by an insured peril; where there is an excepted peril, the subsequent loss caused by an insured peril will be a new and indirect cause because of the interruption in the chain of events.
The insurer will be liable for the loss caused by insured peril which can be easily segregated. Similarly, if the loss occurs by an insured peril and there is, subsequently loss by an excepted peril, the insurer will be liable for loss occurred due to the insured peril. In brief, if the happening of an excepted peril is followed by the occurrence of an insured peril, as a new and independent cause there is a valid claim.
If an insured peril is followed by the happening of an excepted peril, as a new and independent cause, there is a claim excluding loss or damage; caused by the excepted peril. Assignment Or Transfer of Interest It is necessary to distinguish between the assignment of a the subject-matter of insurance, b the policy, and c the policy money when payable.
Marine and life policies can be freely assigned but assignments under fire and accident policies, are not valid without the prior consent of the insurers—except changes of interest by will or operation of law. Moreover, assignments under fire and accident policies must be made before tine insured parts with his, interest. Once he has lost interest, the policy is void and cannot be assigned.
The life policies can be assigned whether the assignee has an insurable interest or not. Life policies are frequently charged, assigned or otherwise dealt with, for they are valuable securities.
The marine policy is freely assignable unless it contains terms expressly prohibiting assignment. It assigned either before or after a loss. A marine policy may be assigned by endorsement thereon or in another customary manner. In practice, a marine cargo policy is frequently endorsed in blank and becomes in effect a quasi-negotiable instrument. Thus, it will be appreciated, adds considerably to the convenience of mercantile transactions as the policy can be negotiated through a bank along with other documents of title.
Assignment in fire insurance cannot be recognized without the prior consent of the insurer, change of interest in fire policies unless by will or operation of law are not valid unless and until the consent of the insurer has been given. The fire policies are not like an assignment nor intended to be assigned from one person to another without the consent of the insurer. Assignment in fire insurance constitutes a new contract. Return of Premium Ordinarily, the premium once paid cannot be refunded.
However, in the following cases, the refund is allowed. By Agreement in the Policy The assured may pay a full premium while affecting the insurance but it may be agreed to return it wholly or partly in the happening of certain events. For example, special packing may reduce risk. For Reasons of Equity Non-attachment of risk: Where the subject-matter insured or part thereof, has never ten imperiled, for example, term insurance with returnable premium where the premium is returned to the policy-holder if death does not occur during the period of insurance.
The undeclared balance of on open policy: The policy may be canceled and premium may be returned for short interest allowed provided there was no further interest in the policy.
The payment of Premium is apportionable. The apportioned part of -the consideration is refundable when a part of policy interest is not involved.
For example, insurance may be taken for a voyage in stages, each stage being rated separately. In such a case if some stages are not completed the premium relating to the incomplete stage is returnable. Where the assured has no insurable interest throughout the currency of the risk, the premium is returnable provided the policy was not attached by way of wagering. Unreasonable delay in commencing the voyage may also entitle the insurer to cancel the insurance by returning the premium.
Where the assured has over-insured under an unvalued policy a proportionate part of the premium is returnable. Over-insurance by Double Insurance If there is over-insurance by double insurance, a proportionate part of the several premiums is returnable provided that if the policies are taken at different times and any earlier policy has at any time born the entire risk or if a claim has been paid.
On the policy in respect of the foil insured thereby, no premium is returnable in respect of that policy and when double insurance is affected knowingly by the assured no premium is returnable. Relationship between Contract of Indemnity and Contract of Insurance. Indemnity in insurance compensates the beneficiaries of the policies for their actual economic losses, up to the limiting amount of the insurance policy. It generally requires the insured to prove the amount of its loss before it can recover.
Recovery is limited to the amount of the provable loss even if the face amount of the policy is higher. This is in contrast to, for example, life insurance, where the amount of the beneficiary's economic loss is irrelevant. The death of the person whose life is insured for reasons not excluded from the policy obligate the insurer to pay the entire policy amount to the beneficiary.
Most business interruption insurance policies contain an Extended Period of Indemnity Endorsement, which extends coverage beyond the time that it takes to physically restore the property. This provision covers additional expenses that allow the business to return to prosperity and help the business restore revenues to pre-loss levels. Position in India- It has been noted above that section recognizes only such contract as a contract of indemnity where there is a promise to save another person from loss which may be caused by the conduct of the promisor himself or by conduct of any other person.
It does not cover a promise to compensate for loss not arising due to human agency. Therefore, a contract of insurance is not covered by the definition of section Thus, if under a contract of insurance, an insurer promises to pay compensation in the event of loss by fire, such a contract does not come within the purview of section Such contracts are valid contracts, as being contingent contracts as defined in section In United India Insurance Co.
Aman Singh Munshilal. The cover note stipulated delivery to the consigner. Moreover, on its way to the destination the goods were to be stored ina godown and thereafter to be carried to the destination. While the goods were in the godown, the goods were destroyed by fire. It was held that the goods were destroyed during transit, and the insurer was liable as per the insurance contract. According to section of the Indian Contract Act, a contract of indemnity means, a contract by which one party promises to save the other from loss caused to him by the conduct of the promisor himself or by the conduct of any other person.
A contract where one party promises to save other from loss which may be caused, either By the conduct of promisor himself Or by the conduct of any other person Definition given in Sec. It includes only: express promises to indemnify, and the loss caused by the conduct of the promisor or any other person.
However, it does not include: implied promises to indemnify, and loss caused by accidents and events not dependent upon the conduct of the promisor or any other person. Section does not cover a promise to compensate for loss not arising due to human agency [ Gajanan Moreswar vs.
Moreswar Madan ]. Therefore, strictly speaking, contracts of insurance cannot be included in the definition. It does not deal with those classes of cases where the indemnity arises from loss caused by events or accidents which do not or may not depend on the conduct of indemnifier or any other person. Thus, if under a contract for insurance, an insurer promises to pay compensation in the event of loss by fire, such a contract does not come within the purview of section Such a contract is valid contract as being contingent contract as defined in section However, it was not the intention of the legislature, as it has been held by Justice M.
Chagla that: Sections and of the Contract Act are not exhaustive of the law of indemnity and the Courts here would apply the same equitable principles that the Courts in England do. It includes a contract to save the promise from a loss, whether it be caused by human agency or any other event like an accident and fire. English Law has given a comprehensive definition which is as follows: "A promise to save another harmless from loss caused as a result of a transaction entered into at the instance of the promisor.
Life Insurance contract is, however, not a contract of indemnity, because in such a contract different considerations apply. Now the Contracts Rights of Third Parties Act allows a promisor to confer an enforceable right upon a third person for nearly all types of transactions, although it seems that currently most commercial parties routinely contract out of the Act.
In these cases the common law prevails and the doctrine of privity remains in force. Legislatures and courts developed complex solutions which are relatively similar in the contract laws of European jurisdictions and which have also been adopted in the more recent proposals for European and international contract law regimes.
A contract has protective effects for a third party if a third person does not acquire a right to performance against the promisor but is nevertheless owed the same duties of care which the promisor owes to the promisee. If the promisor is in breach of this duty the third person can sue him in contract. The exact requirements and the limits of such claims are far from settled.
In other jurisdictions, particularly in England, there is no need for such a doctrine because aggrieved persons who were not party to the contract can usually successfully bring an action in tort. Neither EU private law nor international uniform law instruments, such as the CISG, contain rules on contracts for the benefit of a third party.
The Principles of European Contract Law PECL deal with the doctrine in a fragmentary and inadequate manner by setting forth a single provision Art that draws its inspiration from Art Code civil. By contrast, the more recent projects for harmonizing European or international contract law spell out detailed and balanced sets of rules that match the state of art achieved in national contract laws ch 5.
None of these, though, explicitly deals with contracts with protective effects for third parties. The proposals for harmonization are unanimous in acknowledging the validity of contracts in favour of a third party. Furthermore, they explicitly confirm that the beneficiary acquires an enforceable right. The third party does not need to be in existence at the time the contract is made, nor does he have to be identified, but he must be identifiable with adequate certainty see Art 5.
The content of the right, the time of its coming into existence and its potential removal are very much at the disposal of the promisor and the promisee. Unless they have agreed to the contrary, the right arises immediately, directly ie without any further action on the part of the third party, such as acceptance or accession and independently ie it is not derived from a right previously acquired by the promisee.
The original parties to the contract can revoke or modify the right as long as it has not become irrevocable. The beneficiary is free to revoke the right. The promisor may assert against the beneficiary all defences arising out of the contractual relationship which the promisor could assert against the promisee. The materials published here are subject to exclusive rights of use as held by the Max Planck Institute for Comparative and International Private Law and the publisher Oxford University Press; they may only be used for non-commercial purposes.
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Your Practice. Popular Courses. What Is a Donee Beneficiary? Key Takeaways A donee beneficiary is someone who benefits from the fulfillment of a contract between two other parties.
Donee beneficiaries are separate from other third-party beneficiaries, such as creditor beneficiaries and incidental beneficiaries. While donee beneficiaries are not technically party to the contract, they can legally demand the promised benefits once the conditions or criteria establishing the original contract are met. Compare Accounts. The offers that appear in this table are from partnerships from which Investopedia receives compensation.
This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace. A third-party beneficiary is a person who does not directly participate in a contract but will nonetheless benefit from the agreement.
What Is Privity? Privity is a doctrine of contract law that says contracts are only binding on the parties signing the contract. What Is Subrogation?
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