The House considered whether a provision was a warranty rather than a representation, allowing the contract to be avoided for its breach. It was an inadvertently inaccurate statement by the insured in the proposal form which was expressly incorporated in the policy, as was a clause which expressly rendered the policy void for material misstatement.
Held: The inaccuracy was found to be immaterial but a majority of the House decided that there could be no claim under the insurance.
Lord Haldane said: ‘It is clear that the answer was textually inaccurate. I think that the words employed in the body of the policy can only be properly construed as having made its accuracy a condition. The result may be technical and harsh, but if the parties have so stipulated, we have no alternative, sitting as a Court of justice, but to give effect to the words agreed on. Hard cases must not be allowed to make bad law . . It was a specific insurance, based on a statement which is made of foundational if the parties have chosen, however carelessly, to stipulate that it should be so. Both on principle and in the light of authorities such as those I have already cited, it appears to me that when the answers, including that in question, are declared to be the basis of the contract this can only mean that their truth is made a condition exact fulfilment of which is rendered by stipulation foundational to its enforceability.’
Lord Cave said: ‘But it is contended . . that the ‘basis’ clause is limited or qualified by the fourth condition on the back of the policy [relating to material misstatement’].
And it is argued that, having regard to this condition, a misstatement in the proposal does not avoid the policy unless it is a material misstatement. I do not take that view. The ‘basis’ clause and the fourth condition do not cover the same ground. The former includes promissory statements which are apparently not within the condition; and the condition covers misstatements and concealments outside the proposal with which the ‘basis’ clause is not concerned. I think the two clauses are independent and cumulative provisions, each of which must take effect’
Lord Dunedin said: ‘I think that ‘basis’ cannot be taken as merely pleonastic and exegitical of the following words, ‘and incorporated therewith’. It must mean that the parties held that these statements are fundamental – ie go to the root of the contract – and that consequently if the statements are untrue the contract is not binding’
Judges:
Lord Haldane, Lord Cave, Lord Dunedin
Citations:
[1922] SC (HL) 156, [1922] 2 AC 413
Jurisdiction:
England and Wales
Cited by:
Cited – F L Schuler AG v Wickman Machine Tools Sales Limited HL 4-Apr-1973
The parties entered an agreement to distribute and sell goods in the UK. They disagreed as to the meaning of a term governing the termination of the distributorship.
Held: The court can not take into account the post-contractual conduct or . .
Cited – Genesis Housing Association Ltd v Liberty Syndicate Management Ltd CA 4-Oct-2013
The housing association was to develop an estate of social housing, supported by an insurance guarantee. The insurance proposal contained a clause stating that the information in the proposal was to form the basis of the policy, and that the policy . .
Cited – Genesis Housing Association Ltd v Liberty Syndicate Management Ltd TCC 8-Nov-2012
Insurers had rejected a claim under the policy, saying that the proposal form had included a basis of insurance declaration warranted by the proposer, and that since it had named a main contractor different to the one named, there was no liability . .
Lists of cited by and citing cases may be incomplete.
Contract, Insurance, Scotland
Updated: 14 May 2022; Ref: scu.251141