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The creation of a contract must include the following three basic elements:
- an offer
Under common law, an offeree who wants to accept an offer must:
- Abide by any stipulations in the offer;
- and accept every term of the offer.
Contract of Adhesion
A contract of adhesion is drafted by one party and is offered on a take-it-or-leave-it basis. The other party has little chance to bargain terms, price, or other elements—he or she must "adhere" (stick to) to its provisions.
Aleatory contracts involve an exchange of unequal amounts, specifically unequal transfer of value between the parties. Insurance contracts are aleatory. Depends on whether a chance event occurs and that element of uncertainty is essential with an aleatory contract.
A property insurer agrees to financially protect not the covered building, but the person who owns the building. Because the agreement between these two parties is personal, a property and casualty insurance policy cannot be transferred to a third party without the insurer's consent.
In a unilateral contract, only one party makes an enforceable promise. Insurance contracts are unilateral.
An insurance contract is conditional. This means that its force and effect (and often, its continuation) depend on certain actions of the policyholder.
Ambiguities in a Contract of Adhesion
If the courts find that a contract of adhesion is ambiguous, they will interpret it in favor of the party that did not write the contract.
The court may apply this doctrine if a loss was not covered when it should be reasonably expected to do so.
Under an indemnity contract, when a covered loss occurs, the benefit payable is related to the amount of the loss. The benefit cannot be greater than the actual loss the contract owner incurs or greater than the applicable limit in the policy, whichever is less. These are most property and casualty policies.
Life insurance or an agreed upon value of some property.
A waiver takes place when the party to a contract voluntarily gives up a right that the party knows he or she holds.
Estoppel exists when a party cannot enforce a right that it has voluntarily waived by its past conduct.
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