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

Meera, an actuary, contracts to deliver monthly reserve reports to Kaveri Insurance. The contract does not label the reporting-format term as a condition or warranty. In the first month the format is slightly wrong, which is easily corrected. Applying the innominate (intermediate) term approach, which is most accurate?

Under the innominate term approach, the remedy depends on the seriousness of the breach's consequences. A minor, easily corrected formatting error does not deprive Kaveri of substantially the whole benefit, so termination is probably unavailable and damages are the likely remedy.

  1. AKaveri may terminate at once, because every format requirement is a condition
  2. BKaveri may claim damages only, because every unlabelled term is a warranty
  3. CThe remedy depends on how serious the consequences of the breach are, so termination is probably unavailable for this minor, curable errorCorrect
  4. DThe term is void for uncertainty because it was not labelled
  5. Termination is available only if Meera agrees in writing

Explanation

For an innominate term, the court looks at the effect of the breach, not at a fixed label. If the breach deprives the innocent party of substantially the whole benefit, termination is allowed; a minor, curable error does not.

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