(3) Referring to a defined proportion,

(4) Of a genuine interest in a named object,

(5) Being against contingencies definitely expressed, to which that object is actually exposed,

(6) And in return for a fixed and determined consideration.1

The salient points of the transaction may be briefly put thus Insurance is a limited aleatory or contingent contract of indemnity.2

Assured and Assurer. The parties to the contract are known as the assured and the assurer, the former of whom is protected by the latter from losses and damage suffered by the property insured in consequence of the perils insured against. The assurer is usually in England named the underwriter, because he subscribes his name to the document of insurance. When a request is made to an underwriter to cover property by insurance, the act is usually expressed by saying that "a risk" has been offered to the underwriter. "Risk" thus comes to mean the liability of an underwriter under his contract. But the word "risk" is also used in a more limited sense to mean a peril or danger insured against, for instance the risk of fire, the risk of jettison, etc. The assured is usually a

1 Cf. Duer i. 58. "It is a contract of indemnity in which the insurer, in consideration of the payment of a certain premium, agrees to make good to the assured all losses, not exceeding a certain amount, that may happen to the subject insured, from the risks enumerated or implied in the policy, during a certain voyage or period of time." Exception might perhaps be taken to the phrase "not exceeding a certain amount.' Cf. also the Belgian Insurance law of 1874, "L'assurance est un contrat par lequel l'assureur s'oblige, moyennant une prime, à indemniser l'assuré des pertes ou dommages qu'éprouverait celui-ci par suite de certains événements fortuits ou de force majeure."'

The most recent European code, the Spanish Commercial Code of 1885, avoids the dangers and difficulties of definition by silence, in this respect conforming more to the habit and style of English commercial law than to that which has prevailed in continental commercial legal practice, especially in Latin countries.

2 Cf. Mr. Justice Patterson in Irving v. Manning, 1847, "A policy of insurance is not a perfect contract of indemnity."

merchant or a shipowner, and is perhaps best described as a person who has an insurable interest in the property insured. The nature of insurable interest and the various kinds of property, etc., which can be insured will be discussed hereafter. But the merchant or shipowner need not himself effect the insurance, he may employ some one to do it for him. An agent for this class of business is called an insurance broker, his remuneration consists of a brokerage, being a percentage (usually 5 per cent or 2 per cent) of the cash paid to the underwriter for covering the risk, which is termed the premium.

Offer and Acceptance of Risk.—A risk may be offered for insurance either orally or in writing; acceptance by the underwriter may also be signified either orally or in writing; if in writing it is usually by the underwriter signing or agreeing to sign a memorandum of the transaction. The insurance regulations of most European countries compel the underwriter to prepare or issue a signed document expressing the contract: this document is known as a policy. But some of these regulations do not make the absence of a policy deprive the assured of the advantage of any arrangement made between him and the underwriter-this holds specially of Belgium. In France the majority of the decisions is said to tend to the view that a policy is essential for the purpose of proving the contract (that is, presumably, its extent and intent), but that it is not essential for the purpose of giving the contract validity. It is hard to see

wherein can lie the value of a legally valid contract of whose contents evidence is not forthcoming, unless, indeed, these are elements so essential to certain insurances that the mere existence of the contract of insurance involves the existence of certain terms or conditions in that contract.

English Practice. The English procedure in the offer and acceptance of a risk is unique. It is usual for the broker to offer risks by means of a shorthand description of the venture in question, called a slip (see Appendix A). The underwriter signifies his acceptance of the whole or of a part of the value exposed to peril, by signing or initialling this slip, putting down the amount for which he accepts

liability, or by signing and issuing to the assured (whether principal or broker) a similar document made out in his own office called a covering note or insurance note (see Appendix C). But neither slip nor covering note constitutes the contract. These documents are merely first sketches of the contract; memoranda intended to serve as the groundwork of the contract in its finally completed form; they are simply mémoires pour servir, so incomplete that they can only be explained when taken in conjunction with the contract in its definitively elaborated form.

Slip. Slips or insurance notes of this kind are in England of no legal value: in the form described they are not admitted in any English court as evidence for anything beyond the date of acceptance of a risk; this being the result of fiscal arrangements which are enforced partly by invalidating all contracts not fulfilling the requirements of the Revenue Department. Still slips and insurance notes are regarded by the insuring public with the most jealous care. They are taken by the parties concerned as fixing the terms of the contract so far as they are expressed in these documents, and any failure to fulfil what was understood to be the agreement would most seriously damage the good name and commercial reputation of the offending party. Slips and covering notes are merely provisional agreements; they are really agreements to issue a stamped policy on certain terms and conditions on receipt of the necessary information.

It is expressly provided by 54 & 55 Vict. c. 39, that no contract or agreement for a sea insurance shall be valid unless the same is expressed in what is termed a policy There is thus a complete discrepancy between positive statute law and the traditional and actual practice of daily business. This is carried to such an extent that in marine insurance circles the honourable obligation to fulfil to the utmost any contract for which slip or cover has been initialled or signed by an underwriter, is regarded as so binding that

1 But given in evidence and referred to in judgment of Laing v. Union Marine, Q.B. D. 10 Apl. 1895, 11 Times L. R 359; and in Gardiner v. City of London U/wg Assr.

it is not expected that any information respecting the risk, arriving subsequent to the acceptance of the risk, need be communicated to him, even though it bear on the nature and character of the risk. The ground of that abstention is that it is not fair to tempt any man to swerve from a course to which he is in honour bound. On the side of the assured a much greater laxity has prevailed. Where the venture contemplated cannot be entered upon, there is evidently reasonable cause for the assured to ask the underwriter to consent to cancel the agreement. But if the venture is entered upon in conditions anything like those contemplated when the agreement in question was made, there should not be a request for cancellation without some extremely strong ground, one which ought not to be in any way dependent on the rate of premium paid as compared with that at which the risk might, or could, be insured elsewhere. There seems, in fact, to be no good ground for holding that the assured on a slip or covering note is not bound in honour equally with the underwriter to complete his contract on the terms arranged, provided the risk in question reaches the commencement specified for it by the parties.

Quotation. The rate at which an underwriter expresses his willingness to assume liability for a venture is termed a "quotation." Obviously a mere quotation of itself imposes no legal obligation until it has been accepted by, or on behalf of, the assured. Apart from the provisions of the statute to which reference has been made, it is clear that until acceptance there has never been any agreement between underwriter and assured, and consequently that it is open to the underwriter at any time before acceptance to withdraw his quotation. This is in law the case even when the underwriter has given to the assured what in the language of commerce is known as a "firm" offer. It is popularly supposed that such an offer imposes a legal obligation on the part of the person making the offer to keep it open until the person to whom it is made either rejects or accepts it. But in law there is no foundation for such a view unless some "consideration" be given to the underwriter for the undertaking on his part to keep his offer open. Considera

tion is one of the essentials of a contract according to English law, and may be described generally as “some matter agreed upon as a return or equivalent for the promise made, showing that the promise is not made gratuitously."

Effect of Quotation.—But it does not follow that because a quotation or a firm offer or the initialling of a slip imposes no legal obligation, it does not give rise to an obligation in honour on the part of the underwriter. Different questions arise as to the duties of an underwriter under the code of honour by which he is bound, most of which are by this time settled by usage. It is evident that the complexion of any proposed insurance may be completely altered by the receipt of news. Besides, further information and reflection may cause the underwriter to change his opinion of the conditions and the premium required for the risk proposed. As the offerer has taken away the quotation to consider and remains entirely free of any obligation to accept unless at his own pleasure, it is evidently, on the grounds of ordinary fair dealing, unreasonable to expect that the other party to the proposed agreement, the underwriter, should be placed in a worse position. Besides, it frequently happens that the same business is offered through various hands, without any one knowing definitely through whom it will actually be done. There is no obliga

tion on the underwriter to reserve himself for the first offerer of the risk, although, as a matter of practice, later offerers are often informed that the risk has been shown already. But that is entirely a matter of friendly courtesy. When a broker has reason to expect that the risk will be offered through various hands, or that the rate, if not at once accepted, is likely to be increased, he is accustomed— in case he is on such terms with his principal that his action is sure not to be misunderstood—to accept the rate "subject to approval” (s.a.) and to get the underwriter to sign a slip s.a. This is really changing the quotation into a signed slip for a risk containing the special clause subject to approval. Such a slip can be no more valid than any other slip; it is of no legal validity, it is only better than a quotation in so far as it is a written document evidencing