CII IF1 cheat sheet

Formation test: a binding contract needs an offer, unqualified acceptance of that offer, consideration, intention to create legal relations and capacity. Missing any element means no enforceable contract.

Offer vs invitation to treat: advertisements, price lists, auction notices and retail displays are invitations to treat, not offers; the customer makes the offer. Carlill v Carbolic Smoke Ball is the classic exception where a unilateral advertisement was held to be an offer.

Consideration must be sufficient but need not be adequate, must be given in exchange for the other party's promise (not past), and performance of an existing duty owed to the promisor is generally not good consideration.

Term classification: a condition goes to the root of the contract (breach allows termination plus damages); a warranty is a minor term (breach gives damages only); an innominate term is classified by the seriousness of its breach.

Misrepresentation categories and remedies: fraudulent (damages in tort plus rescission), negligent misrepresentation under s.2(1) Misrepresentation Act 1967 (representor bears the burden of proving reasonable belief), innocent (rescission only, plus court discretion to award damages in lieu).

Exclusion clauses are enforceable only if incorporated (signature, reasonable notice, or course of dealing), cover the loss in question, and survive statutory control: UCTA 1977 reasonableness for business contracts, Consumer Rights Act 2015 fairness for consumers; ambiguity is construed contra proferentem.

Agency authority types: actual express, actual implied (by position or custom), and apparent/ostensible authority where the principal's representation reasonably leads the third party to believe the agent is authorised; unauthorised acts may be ratified by the principal.

Negligence requires duty of care, breach, causation of loss and damage that is not too remote (Wagon Mound test of reasonable foreseeability); the duty test is neighbour principle plus the Caparo three-stage test of foreseeability, proximity and fairness.

Duty of fair presentation (Insurance Act 2015) has three limbs: disclosure of every material circumstance the insured knows or ought to know, sufficient information to put a prudent insurer on notice to ask further questions, and clear, accessible presentation of the risk.

Remedies for breach of fair presentation are proportionate: deliberate or reckless breach allows avoidance and premium retention; inadvertent breach allows the insurer to avoid and return premium, or to apply the terms it would have imposed, or to reduce a claim proportionately.

Indemnity restores the insured to the pre-loss financial position, no better and no worse; it underpins subrogation, contribution, salvage and average, and does not apply to life or personal accident business which pays fixed benefits.

Insurable interest timing: Life Assurance Act 1774 requires interest to exist at inception for life policies; Marine Insurance Act 1906 s.5 defines interest in a marine adventure; indemnity policies require interest at the time of loss.

Subrogation is limited to sums actually paid under the policy, applies only after indemnity, and does not allow the insurer to sue the insured's own family member living at home or to profit from recoveries.

Contribution requires the same insured, the same interest, the same peril, the same period of cover and policies that indemnify; recovery is usually rateable by comparing the sums insured (or the independent liabilities under a non-rateable clause).

Proximate cause is the dominant and effective cause of the loss, not necessarily the last event in the chain; if an insured peril is proximate the claim succeeds even where an excluded peril contributed.

Warranties and other risk terms: under the Insurance Act 2015 breach of warranty suspends the insurer's liability for the duration of the breach only, and the breach can be remedied; breach of a term defining the risk removes cover for that period.

Fraudulent claims (Insurance Act 2015 s.12): the insurer may refuse the whole claim, retain all premium paid and treat the contract as terminated with effect from the fraudulent act, but must not use the fraud to avoid earlier valid claims already paid.

FSMA 2000 gives the FCA three operational objectives: securing an appropriate degree of protection for consumers, protecting and enhancing the integrity of the UK financial system, and promoting effective competition in consumers' interests.

Prudential vs conduct split: the PRA regulates the safety and soundness of insurers and their capital (Solvency UK), while the FCA regulates conduct, market access and distribution; most insurers are dual-regulated.

Threshold Conditions must be satisfied at authorisation and continuously; they cover legal status, location of offices, effective supervision, appropriate resources, suitability of the firm and suitability of the group.

The FCA's eleven Principles for Businesses sit above detailed rules; Principles 6 and 9 (treating customers fairly and delivering the right outcomes) underpin compensation and enforcement decisions.

Consumer Duty requires firms to act in good faith, avoid foreseeable harm and enable consumers to pursue their financial objectives, through four outcomes: products and services, price and value, consumer understanding, and consumer support.

ICOBs (Insurance: Conduct of Business sourcebook) requires status disclosure, a demands-and-needs statement, clear product information, fair claims handling and usually a 14-day cancellation right for consumers; it also controls distance and mid-term changes to cover.

Financial Ombudsman Service: firms have eight weeks to resolve a complaint before the customer may refer it, and the customer then has six months to refer; the award limit is £430,000 for complaints about acts or omissions on or after 1 April 2024.

FSCS protection for insurance: 100% of claims for compulsory insurance (such as motor third-party liability) and 90% of claims for non-compulsory general insurance with no upper limit; life and pension protection is 100% with no upper limit.

SM&CR requires Senior Managers to hold FCA/PRA approval with clear statements of responsibility, annual fitness and propriety certification for certification staff, and conduct rules applied to almost all staff; breaches can lead to personal enforcement action.