Company and contract law

Transcription

1 THE CHARTERED INSURANCE INSTITUTE Company and contract law Objective: To develop in the candidate: a sound knowledge and understanding of the principles and practice of company law; a sound knowledge and understanding of the principles and practice of contract law; a sound knowledge and understanding of the principles and practice of agency law; a sound knowledge and understanding of the special legal principles applicable to insurance contracts; the ability to apply this knowledge to insurance and given scenarios. 520 Method of assessment: See page 7 in the 2005 Advanced Diploma in Insurance Information for candidates brochure. Notes: The syllabus will be based on UK law and practice. The April session will test the legal position as of 31st August of the preceding year. The October session will test the legal position as of 28th February of the same year. 1. Background to company law 1.1 Types of trading organisation name and describe the main characteristics of different types of trading organisations, including: sole traders; partnerships and other unincorporated associations; corporations; specialised organisations. 1.2 Distinctions between a registered company and a partnership distinguish between the requirements of a registered company and a partnership. 1.3 Characteristics of the different kinds of registered company outline the different kinds of registered company; describe the characteristics of each. 1.4 Legal characteristics of a partnership and a partner s liability describe the legal characteristics of a partnership; outline the nature and extent of a partner s liability. 1.5 Procedures and regulations for creating and managing a company under the Companies Acts explain the procedures involved in forming a company and beginning to trade; describe the documents which a company must file with the Registrar of Companies. 1.6 Internal management structure of a company describe the features and workings of a company s internal management structure. 1.7 Regulations relating to the appointment, liability powers and interests of directors detail the regulations affecting directors, their powers and interests; describe the process by which directors may take-up or vacate office; discuss directors liability. 1.8 Role of the company chairman and company secretary outline the role of the company chairman and secretary. 1.9 How a company may be taken over discuss and analyse how a take-over of a company may be effected Financial Services and Markets Act 2000 discuss the main provision of the Act for insurance companies, relating to: authorisation; statutory control; control of business; reporting requirements of 5

2 1.11 Solvency margins of insurance companies and protection of policyholders describe the reasons for, features and calculation of solvency margins; assess the importance of solvency margins to the protection of the policyholder Classification of insurance business and the accounting classes for the purpose of Treasury returns state the accounting classes according to which insurance business is classified Relevant financial services legislation state the main provisions of legislation relevant to financial services. 2. Background to insurance contract law 2.1 Development and nature of English law give an account of the development of English law. 2.2 Classification and sources of English law describe the classification and sources of English law, namely: common law; equity; statute law; judicial precedent; case law. 2.3 Principal legal personnel and their role in the legal system identify the various kinds of legal personnel; describe their function and role in the legal system. 2.4 Difference between civil and criminal law and the system of civil and criminal courts distinguish between civil and criminal law; describe the difference in operation of civil and criminal courts; apply this knowledge to given scenarios. 2.5 Nature of tort and tortious liability describe the nature of tort; explain the general conditions of tortious liability. 2.6 Nature and formation of a trust and the duties of a trustee describe the main characteristics of the law of trusts; describe the formation and main elements of different types of trust; describe the duties of a trustee. 3. General principles of the law of contract 3.1 Classification of contracts classify contracts into their various categories, including: of record; under seal; simple. describe the main features of each. 3.2 Essentials of a valid contract and the formation of a contract discuss the essential elements of a valid contract; discuss the issues surrounding the formation of a contract. 3.3 Distinction between an offer and an invitation to treat distinguish between an offer and an invitation to treat; 3.4 Unrevoked offer and unqualified acceptance apply the principles of unrevoked offer and unqualified acceptance to contracts in general and insurance contracts specifically. 3.5 Intention to create legal relations describe the issues surrounding the intention to create legal relations. 3.6 Consideration discuss consideration; discuss the rules governing consideration as they relate to insurance contracts. 3.7 Formalities necessary for certain contracts explain the formalities necessary for the creation of particular contracts, including: deeds; contracts of insurance. 3.8 Contractual capacity and restrictions on capacity to contract discuss the issue of contractual capacity; identify and discuss restrictions on capacity to contract. 3.9 Contracts entered into by corporations describe the rules applicable to corporations entering into contracts Express and implied terms distinguish between express and implied terms of contract; discuss the effects of express and implied terms of contract; apply this knowledge to insurance contracts of 5

3 3.11 Standard terms and exemption clauses explain the rules governing standard terms and exemption clauses; outline the main provisions of the Unfair Contract Terms Act 1977; 3.12 Exemption clauses in insurance contracts apply their knowledge of exemption clauses to insurance contracts particularly Conditions and warranties distinguish between conditions and warranties in general contract law and insurance law; 3.14 Contracts contrary to law or public policy discuss contracts which are contrary to law; discuss contracts which are contrary to public policy; explore the effects of illegality and public policy with particular regard to insurance contracts Duress and undue influence describe the effect of duress and undue influence on contractual relations Effect of mistake in the formation of contracts discuss the effect of mistake in the formation of contracts; apply this knowledge to insurance contracts in particular Principles relating to fraud and non-disclosure in general contract law consider the rules relating to fraud and non-disclosure; apply this knowledge to contracts of insurance Contracts of utmost good faith and the non-disclosure of material facts describe the requirements of contracts of utmost good faith; consider the effect of non-disclosure of material facts Discharge of the rights and duties under a contract identify the various ways in which rights and duties under a contract may come to an end, including: performance; breach; frustration; agreement; operation of law Right to return of premium outline the principle of the right to return of premium under insurance contracts Remedies for breach of contract discuss the remedies available for breach of contract Limitation of actions consider the principle of limitation of actions and its effect Doctrine of privity of contract outline the doctrine of privity of contract, with particular reference to insurance contracts Assignment of contractual terms and liabilities discuss the way in which contractual rights and liabilities are assigned Assignment of marine insurance and life assurance policies discuss the rules of assignment specifically applicable to marine and life assurance policies Rules governing the interpretation and construction of contracts describe the rules governing the interpretation and construction of contracts; apply these rules Unfair Contract Terms Act 1977 outline the main provisions of the Unfair Contract Terms Act Unfair Terms in Consumer Contracts Regulations 1994 outline the main provisions of the Unfair Terms in Consumer Contracts Regulations Special legal principles applicable to insurance contracts 4.1 Doctrine and essentials of insurable interest discuss the doctrine and essentials of insurable interest, including the ways in which it has been modified. 4.2 Distinction between insurance contracts and wagering contracts distinguish between insurance contracts and wagering contracts Discharge of insurance contracts apply knowledge of discharge specifically to insurance contracts of 5

4 4.3 Application of insurable interest to different classes of insurance apply the doctrine of insurable interest to the main classes of insurance. 4.4 Assignment of insurable interest discuss the issues surrounding the assignment of insurable interest. 4.5 Doctrine of utmost good faith apply the doctrine of utmost good faith to insurance contracts. 4.6 Material facts describe the nature of material facts; discuss the issues surrounding their disclosure. 4.7 Duration of the duty of disclosure discuss the duration of the duty of disclosure, including: renewal; alteration to the contract. 4.8 Representations and warranties distinguish between representations and warranties. 4.9 Express and implied warranty consider the nature of express and implied warranty; discuss the effect of breach of warranty Duty of disclosure and the position of the insurance intermediary consider the position of the insurance intermediary in relation to the duty of disclosure Breach of utmost good faith discuss the implications of a breach of utmost good faith; discuss the remedies available Doctrine of proximate cause and the duty of proof of loss discuss the doctrine of proximate cause; discuss the duty of proof of loss; apply the doctrine to individual situations Remote and concurrent causes discuss the effect of remote and concurrent causes Modification of the doctrine of proximate cause in policy wordings discuss the way in which the doctrine of proximate cause may be modified in policy wordings Concept and measure of indemnity discuss the concept of indemnity and its importance; describe the various measures of indemnity Provision of indemnity apply the concept of indemnity to various classes of insurance Limitations and modifications discuss the factors which limit or modify the principle of indemnity Corollaries of indemnity discuss the corollaries of indemnity, namely subrogation and contribution; discuss how they might arise Practical applications of the rights of subrogation and contribution apply subrogation and contribution rights practically, taking account of market practice Voluntary codes of practice describe the role, purpose and main features of voluntary codes of practice for insurance companies and intermediaries Legislative provisions outline the main provisions of the Financial Services and Markets Act 2000 relevant to insurance; describe the main rules governing investment business. 5. Law of agency and its application to insurance 5.1 Relationship between principal and agent describe the nature and requirements of the relationship between principal and agent. 5.2 Creation of agency describe the methods by which agency is created, including: express; implied; estoppel; ratification; necessity. 5.3 Authority of an agent discuss the authority of an agent of 5

5 5.4 Duties owed by principals and agents to each other discuss the duties owed by principals and agents to each other. 5.5 Relationship of principals and agents to third parties apply the principles governing the relationship of principal and agent to third parties. 5.6 Termination of agency identify the ways in which agency can be terminated; discuss the effects of termination. 5.7 Intermediary as agent describe the role and requirements of an intermediary as an agent of the insurer, proposer or insured. 5.8 Legal principles applicable to insurance brokers describe the legal principles applicable to insurance brokers. Reading list The following list provides details of various publications which may assist with your studies. The primary text for this syllabus is shown in bold type. Periodicals and publications listed as additional reading will be of value in ensuring candidates keep up to date with developments and in providing a wider coverage of syllabus topics. Any reference materials cited are authoritative, detailed works which should be used selectively as and when required. Note: The examination will test the syllabus alone. The reading list is provided for guidance only and is not in itself the subject of the examination. Most of these additional study materials can be borrowed or purchased from CII Information Services at Primary text Company and Contract Law. London: The CII. Coursebook 520. Utmost good Faith and Non-disclosure. Ian Youngman. London: CII Information Services. Online document available to CII members only. Updated as necessary. Reference works Cheshire, Fifoot and Furmston s Law of Contract. 14th ed. M. P. Furmston. London: Butterworths, c2001. Colinvaux & Merkin s Insurance Contract Law. Robert Merkin. Brentford: Sweet & Maxwell. Updated. Company Law. Charlesworth & Morse. 16th ed. Geoffrey Morse. London: Sweet & Maxwell, Insurance Law: Text and Materials. Ray Hodgin. 2nd ed. London: Cavendish, The Law of Insurance Contracts. Malcolm A Clarke. 4th ed. London: LLP, MacGillivray on Insurance Law: Relating to all Risks other than Marine. 10th ed. London: Sweet and Maxwell, The Modern Law of Insurance. Andrew McGee. London: Butterworths, c2001. Periodicals Insurance Law Monthly. London: Informa. Monthly. The Journal. London: The CII. Six issues a year. Also available online (CII/SOFA members only) at Post Magazine. London: Timothy Benn. Weekly. Examination guides You are strongly advised to study these before the examination. Please visit to buy online or contact CII Customer Service for further information on Exam technique/study skills There are many modestly priced guides available in bookshops. You should choose one which suits your requirements. An example is: The exam secret: how to make the grade. Barbara Brown. Tadworth, Surrey: Elliott Right Way Books, For a more interactive approach, you should consider: Winning the brain game. London: The CII, CD Rom. Additional reading Birds Modern Insurance Law. John Birds. 5th ed. London: Sweet & Maxwell, The Regulation of Insurance Companies. Tony Wiltshire. London: CII Information Services. Online document available to CII members only. Updated as necessary of 5