LML4805 STUDENT AIDS
1 CONCEPTS OF INSURANCE, INSURANCE CONTRACT AND INSURANCE
LAW; INSURANCE IN AN ECONOMIC AND LEGAL SENSE, SOME
CLASSIFICATIONS OF INSURANCE CONTRACTS
Lecturers’ Summary: In this topic we will try (1) to understand the difference and the
relationship(s) between the concepts of “insurance” (an economic or commercial notion)
and “insurance contract” (a legal notion, which is encountered in “(insurance) law”); the
insurance contract is (one of) the means by which insurance is conducted in commercial
practice. We also need (2) to understand how, and with reference to what (eg, risks, nature,
subject matter) insurance contracts may be classified and that these classifications are not
mutually exclusive but overlap.
Question: Distinguish between life insurance and death insurance.
Answer: Life insurance is insurance that concerns human life, and, more specifically (as
appears from the statutory definition) the commencement, duration or termination of such
life. Thus, insurance against the birth of a person, or against a person living beyond a
certain age, or dying (at any time or before a certain age), are all examples of life insurance.
Death insurance, therefore, is merely an example of life insurance (and a term that insurers
for obvious reasons prefer not to use).
Although not part of the answer, also note the new classes and sub-classes of life insurance
in terms of the Insurance Act 18 of 2017 as explained in Tutorial letter 102.
2 SOURCES OF SOUTH AFRICAN INSURANCE LAW
Lecturers’ Summary: The focus here is (1) to identify the different types of sources of
South African insurance law (binding v persuasive sources), (2) to identify the different
sources themselves (eg, common law, statute law), and (3) to evaluate their relative value
as sources (which has, or should have, preference over the other).
Question: What effect did the promulgation of the Pre-Union Statute Law Revision Act 43
of 1977 have on (the sources of) the South African law of insurance?
Answer: Prior to the promulgation of this Act, English law was a binding source of
insurance law, at least for certain types of insurance, in two former provinces (Cape and
Orange Free State). After 1977, that is no longer the case. Throughout South Africa English
(insurance) law is now merely a persuasive source of our insurance law, to be referred to,
as comparative material, when the binding sources of our law do not provide any, or any
suitable, answer to a particular problem. And as comparative material, it may be argued,
English law, should be referred to after (or at least not in preference to) civilian (European)
legal systems which are in nature close to our primary binding source of our insurance law,
namely our common law.
1
, 3 NATURE AND CHARACTERISTICS OF THE INSURANCE CONTRACT
Lecturers’ Summary: The focus here is how to distinguish an insurance contract from other
types of contract. For that purpose, we have to identify the characteristic features
(essentialia) of an insurance contract; these features are also the ones taken up in a proper
definition of an insurance contract. The insurance contract should, in particular, be
distinguished from other, closely-related contracts (eg, wagers, suretyships) which share
one or more (but obviously not all) of the essential features of the insurance contract. A
problem in this regard is to identify those features which are essential or distinguishing
features of the insurance contract, for many so regarded (eg, being a contract of good faith)
are in fact common to all contracts and can, therefore, not serve to identify and distinguish
the insurance contract. Ultimately there is therefore still uncertainty about the formulation
of a precise definition of the insurance contract, one that is both inclusive of all types of
insurance on the one hand, and not too encompassing so as to be useless on the other hand.
Question: Explain the similarities and differences between insurance contracts and (a)
wagering agreements, and (b) contracts of suretyship.
Answer: (a) Insurance contracts and wagers are similar (ie, share the following essential
feature) in that the performance of one of the parties (insurer, loser) depends on the
occurrence of an uncertain event; they differ in that the performance of one of the parties
to an insurance contract (the insurer) is aimed at indemnifying the other party against a loss
(it is here that the requirement of an insurable interest may come into play) whereas that is
not the case with a wager: there is an obligation for the loser to pay the winner irrespective
of any loss the latter may have suffered; (b) Insurance contracts and suretyships are similar
in that the performance of one of the parties (insurer, surety) depends on the occurrence of
an uncertain event; they differ in that that party’s undertaking is one in terms of an
independent and principal contract and not, as in the case of suretyship, one in terms of a
contract subsidiary to and dependent upon another (the main) contract (eg, the surety’s
undertaking to pay the creditor is given with reference to the debtor’s failure to pay the
creditor in terms of the main contract); put differently, the surety performs the debtor’s
obligation whereas an insurer always performs its own obligation.
4 REQUIREMENTS FOR A VALID INSURANCE CONTRACT
Lecturers’ Summary: Here we have to identify, and to apply to insurance contracts, the
requirements for a valid (insurance) contract.
Question: Distinguish between the characteristic features (essentialia) of, and the
requirements for the validity of, an insurance contract.
Answer: The characteristic features of an insurance contract are those features which,
together, serve to distinguish an insurance contract from other types of contract; if any one
of them is absent, the contract cannot qualify as an insurance contract but must be classed
as a contract of another type or, even, as an unclassified (unique) contract (see again
learning unit 3 above). The requirements for the validity of an insurance contract are the
same as those for any other type of contract; they are common to all contracts, of whatever
2
1 CONCEPTS OF INSURANCE, INSURANCE CONTRACT AND INSURANCE
LAW; INSURANCE IN AN ECONOMIC AND LEGAL SENSE, SOME
CLASSIFICATIONS OF INSURANCE CONTRACTS
Lecturers’ Summary: In this topic we will try (1) to understand the difference and the
relationship(s) between the concepts of “insurance” (an economic or commercial notion)
and “insurance contract” (a legal notion, which is encountered in “(insurance) law”); the
insurance contract is (one of) the means by which insurance is conducted in commercial
practice. We also need (2) to understand how, and with reference to what (eg, risks, nature,
subject matter) insurance contracts may be classified and that these classifications are not
mutually exclusive but overlap.
Question: Distinguish between life insurance and death insurance.
Answer: Life insurance is insurance that concerns human life, and, more specifically (as
appears from the statutory definition) the commencement, duration or termination of such
life. Thus, insurance against the birth of a person, or against a person living beyond a
certain age, or dying (at any time or before a certain age), are all examples of life insurance.
Death insurance, therefore, is merely an example of life insurance (and a term that insurers
for obvious reasons prefer not to use).
Although not part of the answer, also note the new classes and sub-classes of life insurance
in terms of the Insurance Act 18 of 2017 as explained in Tutorial letter 102.
2 SOURCES OF SOUTH AFRICAN INSURANCE LAW
Lecturers’ Summary: The focus here is (1) to identify the different types of sources of
South African insurance law (binding v persuasive sources), (2) to identify the different
sources themselves (eg, common law, statute law), and (3) to evaluate their relative value
as sources (which has, or should have, preference over the other).
Question: What effect did the promulgation of the Pre-Union Statute Law Revision Act 43
of 1977 have on (the sources of) the South African law of insurance?
Answer: Prior to the promulgation of this Act, English law was a binding source of
insurance law, at least for certain types of insurance, in two former provinces (Cape and
Orange Free State). After 1977, that is no longer the case. Throughout South Africa English
(insurance) law is now merely a persuasive source of our insurance law, to be referred to,
as comparative material, when the binding sources of our law do not provide any, or any
suitable, answer to a particular problem. And as comparative material, it may be argued,
English law, should be referred to after (or at least not in preference to) civilian (European)
legal systems which are in nature close to our primary binding source of our insurance law,
namely our common law.
1
, 3 NATURE AND CHARACTERISTICS OF THE INSURANCE CONTRACT
Lecturers’ Summary: The focus here is how to distinguish an insurance contract from other
types of contract. For that purpose, we have to identify the characteristic features
(essentialia) of an insurance contract; these features are also the ones taken up in a proper
definition of an insurance contract. The insurance contract should, in particular, be
distinguished from other, closely-related contracts (eg, wagers, suretyships) which share
one or more (but obviously not all) of the essential features of the insurance contract. A
problem in this regard is to identify those features which are essential or distinguishing
features of the insurance contract, for many so regarded (eg, being a contract of good faith)
are in fact common to all contracts and can, therefore, not serve to identify and distinguish
the insurance contract. Ultimately there is therefore still uncertainty about the formulation
of a precise definition of the insurance contract, one that is both inclusive of all types of
insurance on the one hand, and not too encompassing so as to be useless on the other hand.
Question: Explain the similarities and differences between insurance contracts and (a)
wagering agreements, and (b) contracts of suretyship.
Answer: (a) Insurance contracts and wagers are similar (ie, share the following essential
feature) in that the performance of one of the parties (insurer, loser) depends on the
occurrence of an uncertain event; they differ in that the performance of one of the parties
to an insurance contract (the insurer) is aimed at indemnifying the other party against a loss
(it is here that the requirement of an insurable interest may come into play) whereas that is
not the case with a wager: there is an obligation for the loser to pay the winner irrespective
of any loss the latter may have suffered; (b) Insurance contracts and suretyships are similar
in that the performance of one of the parties (insurer, surety) depends on the occurrence of
an uncertain event; they differ in that that party’s undertaking is one in terms of an
independent and principal contract and not, as in the case of suretyship, one in terms of a
contract subsidiary to and dependent upon another (the main) contract (eg, the surety’s
undertaking to pay the creditor is given with reference to the debtor’s failure to pay the
creditor in terms of the main contract); put differently, the surety performs the debtor’s
obligation whereas an insurer always performs its own obligation.
4 REQUIREMENTS FOR A VALID INSURANCE CONTRACT
Lecturers’ Summary: Here we have to identify, and to apply to insurance contracts, the
requirements for a valid (insurance) contract.
Question: Distinguish between the characteristic features (essentialia) of, and the
requirements for the validity of, an insurance contract.
Answer: The characteristic features of an insurance contract are those features which,
together, serve to distinguish an insurance contract from other types of contract; if any one
of them is absent, the contract cannot qualify as an insurance contract but must be classed
as a contract of another type or, even, as an unclassified (unique) contract (see again
learning unit 3 above). The requirements for the validity of an insurance contract are the
same as those for any other type of contract; they are common to all contracts, of whatever
2
