IIQE Paper 1 Legal Principles question: proposed fire contract

IIQE Paper 1Legal Principles

An agent authorised only to sell travel insurance for an insurer purports to grant fire cover on a client's shop. Until the insurer decides, the proposed fire contract is:

A voidable at the client's option
B unenforceable until a policy is issued
C technically void, but open to ratification
D valid and binding on the insurer from the start

Show the answer and explanation

Answer: C. technically void, but open to ratification

Answer: technically void, but open to ratification. A contract made without authority from the insurer is technically void, but the insurer may subsequently accept the insurance and confirm cover, so the contract becomes valid retrospectively.Why not the others:• voidable at the client's option: The defect is lack of authority, which gives the client no such option.• unenforceable until a policy is issued: The problem is lack of authority, not a missing policy.• valid and binding on the insurer from the start: The agent had no authority for fire business, so the insurer is not bound unless it ratifies.Watch out: Assuming any cover granted by an insurer's agent binds the insurer.Rule: Cover granted without authority is technically void unless the principal ratifies it.Source: IA P1 Study Notes, 2024 Edition (8th ed., Nov 2024; for exams from 17 Feb 2025), 2.2.2(b), p. 2/6