Table of contents - this section

• Contracts generally
  
• Comparison with other law
  
• Contracts of insurance
  

3.1 Contracts generally

In most basic terms, a contract is a legally-binding agreement. In order to make a contract at law, a number of elements must be satisfied:

• Offer
• Acceptance by the other party
• Certainty of the agreements meaning
• Intention to create a legal binding relationship between the parties
• Consideration (usually money) for the promise.

The content of a contract may be express, (for example, stated either orally or in writing), whilst some terms may be implied into the contract, (such as common business or trade practice).

3.2 Contract compared with other law

Obligations in contract may be contrasted with those in tort (such as negligence, trespass, or nuisance), bailment and/or agency. In some cases the rights of each respective party will be partially in contract and another area of the law, such as negligence.

It will often be the case that in litigation proceedings, a party will sue in all available legal causes of action, just in case one fails.

3.3 Contracts of insurance

Section 10 of the Insurance Contracts Act 1984 ("the Act") provides three categories of contracts which are covered by the Act. Broadly, they are:-

1. Those contracts which in general law would be considered a contract of insurance.

2. Those contracts which may not be ordinarily regarded as a contract of insurance, but are included to the extent that they provide an insurance coverage. For example, where a contract to purchase property from an insurer includes a cause where the insurer also agrees to insure the property.

3. Those contracts which may not be ordinarily considered a contract of insurance but do effect the operation of a contract of insurance to which the Act applies.

Therefore in a large degree the definition of a contract of insurance is left to the case law (that is, precedent cases, as decided by Judges). Here is one definition which has been used in a number of cases:

"the contract under which one party (the insurer) agrees, in return for a consideration to indemnify another (the insured) for loss suffered as a result of the occurrence on the specified events which caused the destruction, loss or injury of something in which the other party has an interest"

It follows that there may be benefits in having a contract declared one of insurance, due to the benefits under the Act and the case law.