1、The insurance Policy,Chapter Outline,Fundamentals of Contract LawType of ContractGeneral Requirement for a ContractThe Policy as PropertyRight To Use and Enjoy PropertyRight to Dispose of Property,Fundamentals of Contract Law,A contract is a legally enforceable agreement between two or more parties.
2、The two parties to an individual life an health insurance contract are insurance companies that issued the policy and the individual who purchased the policy.,Type of Contract,Formal contracts and informal contractsBilateral contracts and unilateral contractsCommutative contracts and aleatory contra
3、ctsBargaining contracts and contracts of adhesion,Formal and informal Contracts,A formal contract is one that is enforceable because the parties to the contract met certain formalities concerning the form of the agreement.An informal contract is a contract that is enforceable because the parties to
4、the contract met requirements concerning the substance of the agreement rather than requirement concerning the form of the agreement,Formal and informal Contracts,In theory, life and health insurance contracts, as informal contracts,could be made in either written or oral form.But in some countries,
5、 insurance contracts are required to express in written form.,Formal and informal Contracts,第十三条投保人提出保险要求，经保险人同意承保，并就合同的条款达成协议，保险合同成立。保险人应当及时向投保人签发保险单或者其他保险凭证，并在保险单或者其他保险凭证中载明当事人双方约定的合同内容。 经投保人和保险人协商同意，也可以采取前款规定以外的其他书面协议形式订立保险合同。,Formal and informal Contracts,Can a person enter into a valid life ins
6、urance contract on the Internet?,Bilateral and Unilateral Contracts,Bilateral contract a contract between two parties who both make legally enforceable promises when they enter into the contract.Unilateral contract a contract between two parties only one of them makes legally enforceable promises wh
7、en entering into the contract.,Bilateral and Unilateral Contracts,Life and health insurance policies are unilateral contracts.The insurance promise to provide coverage in return for a stated premium.The purchase of the policy does not promise to pay the premiums and cannot be compelled by law to pay
8、 the premiums.,Commutative and Aleatory Contracts,Commutative contract an agreement under which the parties specify in advance the values that will be exchange , moreover, the parties generally exchange items or services that they are of relatively equal value.Aleatory contract an agreement under wh
9、ich one party provides something of value to another party in exchange for a conditional promise.,Commutative and Aleatory Contracts,A conditional promise is a promise to perform a stated act if a specified,uncertain event occurs. Life and health insurance policies are aleatory contracts.,Bargaining
10、 Contracts and Contract of Adhesion,Bargaining contract a contract that is creates by both contracting parties who, as equals, set the terms and conditions of the contract.Contract of adhesion a contract that one contracting party prepares and that the other contracting party must accept or reject a
11、s a whole, without any bargaining between the parties.,Bargaining Contracts and Contract of Adhesion,Individual life and health insurance policies are contracts of adhesion.If any policy provision is ambiguous,the courts usually interpret that provision in whatever manner would be most favorable to
12、the policyowner or the beneficiary.,General Requirement for a Contract,Valid contract a contract that is enforceable at law.Void contract a contract that was never enforceable at law.Voidable contract a contract in which a party has the right to avoid her obligations under the contract without incur
13、ring legal liability.,Four requirement of a valid informal contract,The parties to the contract must be manifest their mutual assent to the term of the contracts.The parties to the contract must have contractual capacity.The parties to the contract must exchange legally adequate consideration.The co
14、ntract must be for a lawful purpose.,Mutual Assent,Mutual assent is met when the parties reach a meeting of minds about the terms of their agreement.,Contractual Capacity,Contractual capacity each party must have the legal capacity to make a contract.Contractual capacity of individualsContractual ca
15、pacity of organizations,Contractual capacity of individuals,The majority of people who have limited contractual capacity are:minorslack mental capacity,Minors,Generally, contracts entered into by a minor are voildable by the minor.The insurance company have to return the premium the minor had paid o
16、n the policy.,Lack mental capacity,A persons lack of mental capacity may affect his contractual capacity in two situations.A court declares the person to be insane or mentally incompetent.The persons mental competent is impaired as a result of being drunk, drugged, or insane.,Lack mental capacity,A
17、contract entered into by a person who has been declared insane or incompetent is usually void.Contract entered into by someone whose mental competence is impaired are generally voidable.,Contractual Capacity of Organization,A company that is not licensed or authorized to do business as a insurance c
18、ompany does not have the legal capacity to make a insurance contract. The legal effect of such a contract depends on the laws of the particular jurisdiction.,Legally Adequate Consideration,Consideration each party must give or promise something that will be of value to the other party.The parties to
19、 the contract must exchange consideration.In addtion, the consideration exchange must be legally adequate.,Legally Adequate Consideration,If the intial premium is not paid, then no contract has been formed because the applicant has not provided the required consideration.Renewal premiums,which are p
20、remiums payable after the initial premium,are a condition for continuance of the policy and are not consideration for the policy.,Legally Adequate Consideration,The application and the initial premium are given by the policyowner as consideration for a life or health insurance contract. This conside
21、ration is given in return for the insurers promise to pay the benefit if the conditions stated in the policy occur.,Lawful purpose,No contract can be made for a purpose that is illegal or against the public interest. The requirement of lawful purpose in the making of an individual life or health ins
22、urance contract is fulfilled by the presence of insurance interest.,The policy as Property,Insurance policies are a type of property.An insurance policy is a intangible personal property, it represents intangible legal rights that have value and can be enforced by the court.The owner of an insurance
23、 policy holds these ownership right in an insurance policy.,Right to use and enjoy property,The owner of a life insurance policy has a right to name the policy beneficiary, to change the beneficiary designation at any time while the policy is in force.,Right to dispose of property,The policyowner may transfer ownership of the policy by making a gift of the policy to someone else.,question,Distinguish the type of contractsdefine valid,void,and voidable contractsIdentify the four requirement for a contractidentify the property rights that a policyowner has in the insurance policy he owns,
