INTRODUCTION
According to the Black Law’s dictionary, Insurance is defined as ‘A contract by which one party (the insurer) undertakes to indemnify another party (the insured) against risk of loss, damage, or liability arising from the occurrence of some specified contingency, and usually to defend the insured or to pay for a defense regardless of whether the insured is ultimately found liable. An insured party usually pays a premium to the insurer in exchange for the insurer's assumption of the insured's risk.’[1]The following are essentials of an insurance contract. Insurance contract is a unilateral contract in which the promise of one party is exchanged for a specific act of the other party; it is further a contract of adherence. Due to its nature, it then follows that the insurer is the one who benefits than the insured because no man who can always be fair in his own case.
In ROBERTS V.WARNE [1973] RTR 217, the relevant policy did not cover the particular driver who was using the car, although a cover note had been arranged to effect this and when this expired the insurer clearly regarded the driver as uncovered. The driver was convicted for using the car without insurance and the owner for causing or permitting this. It was held that even where the insurer were bound contractually to cover the driver, which may well have been the case the policy, did not cover him.
Essentials of an insurance contract
Agreement: The agreement means communication by the parties to one another regarding their intentions to create a legal relationship. For a valid contract of insurance, there must be an agreement between the parties. That is one making offer or proposal and another accepting the proposal or signifying his acceptance of the proposal.
Free consent: There must be free consent between the two parties in the contract. Parties entering into the contract should enter it by their free will and consent. The contract entered via undue force, influence, fraud, misrepresentation, hiding the facts is not the valid contract. Consent received forcefully can't be a free consent.
Legal consideration: There must be valid considerations in a valid insurance contract. Consideration is the value that each party gives to the other party. For the establishment of the legal relationship, creation of an obligation between them and to make it enforceable by law there must be a lawful consideration.
Competent of contract: The parties to the contract should satisfy certain qualifications to enter into contracts. A person who is at the age of majority according to the law, who is of sound mind and who is not disqualified by law can enter into the contract. So, the person of unsound mind disqualified and minors cannot enter into insurance contracts. A contract made by incompetent parties will be invalid.
Components of contract: An agreement must be legally competent between the parties to enter into the contract. It means both parties in the insurance contract must be at the age of majority. He/she must have a sound mind and not disqualified by law of the country. It states that a person who is minor, lunatics, idiot and alike cannot enter into an insurance contract. The contract entered into by these will be declared as void.
