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IIQE Paper 1 Legal Principles question: insurer's reply

IIQE Paper 1Legal Principles

A proposer applies for cover. The insurer replies that it will accept only at a higher premium. The insurer's reply is:

A an acceptance
B a counter-offer
C a binding contract at the higher premium
D an invitation for the proposer to revise his own offer

Show the answer and explanation

Answer: B. a counter-offer

Answer: a counter-offer. An intention to vary the terms, such as requiring an increased premium, constitutes a counter-offer once communicated.Why not the others:• an acceptance: Acceptance must accept all terms of the offer; a higher premium varies them.• a binding contract at the higher premium: No contract exists until the proposer accepts the counter-offer.• an invitation for the proposer to revise his own offer: The reply is itself a counter-offer, which the proposer may accept.Watch out: Treating a 'yes, but' reply as acceptance.Rule: Varying the terms (e.g. a higher premium or restrictions) is a counter-offer, not an acceptance.Source: IA P1 Study Notes, 2024 Edition (8th ed., Nov 2024; for exams from 17 Feb 2025), 2.1.3(b), p. 2/3

Common mistake

Treating a 'yes, but' reply as acceptance.

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Related IIQE Paper 1 questions

A carrier holds a cargo of fresh fruit that is rotting at port. The owner cannot be contacted, so the carrier sells the fruit to save its value. The carrier is acting under Which two of the following agreements are presumed to be made with an intention to create legal relations?A contract between A and B expressly provides that C may enforce a term giving C a benefit. C gave no consideration. Under Cap. 623, C

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Original study material written to the public IIQE Paper 1 syllabus. Independent, not endorsed by the Insurance Authority or the VTC. Verify figures and rules against current guidance before relying on them.