Most of insurance contracts are simple contracts, and in the case of simple contract, there are some essential elements, and out of these three elements are most important such as a) Unrevoked Offer, b) Unqualified Acceptance and c) Consideration and these are discussed below:
A) Unrevoked Offer: To start with, there must be an unrevoked offer from the offerer, which offer is left to be accepted by the offeree. It has to be an unrevoked offer in the sense that as the offerer has a right to withdraw his offer before it is accepted or as sometimes there is the question of the time limit within which the acceptance is to be made, the acceptance of the offer must take place within the time of before it is withdrawn. Otherwise, there is virtually no offer left for acceptance.
B) Unqualified Acceptance: There must be an acceptance of the offer made and which acceptance must be unqualified. It should be appreciated by the students that a qualified acceptance is ‘no-acceptance’ since virtually it is a ‘counter offer’. In the case of contract law, conditional acceptance is not a proper acceptance. It is one kind of counter offer.
C) Consideration: in order to validate a simple contract, it must be supported by consideration. Consideration may be defined as some right, benefit, profit or advantage accruing to one party or some loss detriment, forbearance of responsibility suffered or undertaken by the other. In insurance contracts, the premium is the consideration passing from the insured to the insurer, and the promise to pay claim is the consideration passing from the insurer to the insured.
In that situation, Joseph offered a revoked offer to the insurance agent and also wrote a check to pay for the premium. The insurance agent conditionally accepted that unrevoked offer. But to constitute a valid simple contract, the offer must be unrevoked, the acceptance must be unconditional, and there must be the presence of consideration. Since in that situation acceptance was conditional, that contract was not valid, and that’s why there is no question of the termination or revocation of acceptance. When the insurance company underwriter rejected his application and filed a request to the insurance company’s accounting office to return his premium, there was no existence of the proper contract, and that’s why in case of filing a claim on Joseph life insurance contract, the claim will not be covered.