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IAI Actuarial Core Principles · Business Management · Implied terms, exclusion of liability, contractual remedies and damages

An actuarial consultancy, Meridian Advisory, contracts to deliver a pricing model to an insurer by 30 June. The contract says nothing on whether time is of the essence. The model arrives six days late, with no loss to the insurer, who then purports to terminate immediately. Which statement is most consistent with the general approach to such terms?

The insurer would normally be limited to damages for any proven loss. Where the contract does not make time of the essence, a short delay is not treated as a condition breach, so immediate termination would be unjustified, and no loss means only minimal damages.

  1. ATime is not presumed to be of the essence in such a commercial service contract, so the insurer would normally be limited to damages for the proven lossCorrect
  2. BAny delay automatically makes the term a condition, so termination is justified
  3. CThe insurer may terminate because every promise about timing is a condition by law
  4. DThe contract is void because it is silent on time
  5. The insurer may claim the full contract price back as a penalty

Explanation

Unless the contract makes time essential, or circumstances show it is, a short delay is typically a breach sounding in damages only. Here no loss was suffered, so damages would be minimal. Termination would itself be wrongful.

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