Maritime Law and Marine Insurance: Process of Contract Formation and Principles of Marine Insurance

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Maritime Law and Marine Insurance

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Table of Contents
Introduction............................................................................................................................. 2
Process of contract formation..................................................................................................3
Principles of Marine insurance.................................................................................................5
Uberrima fides......................................................................................................................5
Insurable Interest................................................................................................................. 7
Conclusion................................................................................................................................ 9
References..............................................................................................................................10

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Introduction
During the British rule, the principles of the English legal system applied in Cyprus. After its
independence in 1960, the country retained most of the rules of the English legal system.
The provisions of the common law and principle of equity are incorporated in the legal
system of Cyprus. The implementation of these laws did not conflict which the provisions
and rights given under the Constitution of Cyprus. The laws which are passed by the House
of Representatives also did not conflict with these laws. Moreover, Cyprus becomes a
member of the European Union in 2004 based on which the EU law has shaped the legal
system of Cyprus (Lambrou, 2012). The marine insurance policies in Cyprus are heavily
influenced by the English law as well. These regulations were aimed to supervise the
operations of insurance companies and protect the rights and liabilities of the insured. No
subsequent legislation has superseded these laws. These policies provide key provisions
regarding the process of contract formation in marine insurance and their governance
(Bruce, 2016). The objective of this report is to evaluate the key legislation in Cyprus to
identify the process through which contracts relating to marine insurance are formed in the
country. This report will also focus on identifying two key principles of marine insurance law
and how they affect the parties who enter into contract for marine insurance.

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Process of contract formation
Similarly to common contract elements, the contracts which are formed for marine
insurance have similar elements as well which include offer, acceptance, agreement,
consideration and intention to create a legal relationship between parties. The parties must
enter into a clear legally binding agreement in order to bind each other in a legal
relationship. The agreement must contain relevant terms and conditions which affect the
interest or rights of the parties which include name of the parties, risks relating to the
subject matter, premium amount and others (Thomas, 2015). It is important that the parties
of the contract must understand these terms which become a part of the marine insurance
contract and these terms are binding upon the parties. The process of formation of a marine
insurance contract requires parties to comply with these essential elements to ensure that
they form a valid legal relationship between each other.
Due to characteristics insurance market, the marine insurance contracts have a higher
degree of credit based on which both parties have to maintain ‘uberrima fides’ or the ‘duty
of utmost good faith’ to ensure that their disclose all the material facts to each other and
avoid misrepresentation of pending negotiation of contract (Merkin, 2014). There are no
local legislation available in Cyprus based on which the principles of the English Marine
Insurance Act 1906 apply on the country. Section 17 to 20 of this Act provides key
regulations which govern the element of maintaining ‘utmost good faith’ along with a duty
to avoid making misrepresentations on the parties while negotiating the contract.
 Offer
An offer is a key element of an insurance contract which begins the process of formation of
the contract. The offer to form the contract can be made by the insurer or the prospective
insured. The practice of making an offer is made through giving a proposal form by the
parties (Lambrou, 2012). This offer can only be considered as valid and complete if it is
communicated by the party. It is necessary that the proposal form which contained the offer
is forwarded by the party to the insurer. While sending the proposal form, its content can be
varied based on the type of marine insurance and the practices of the insurance companies.
Although the terms and content of the proposal form can vary based on different type of