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

Rohan Mehta, an actuary, supplies a pricing model to Kaveri Insurance under a short contract that is silent on quality. The model contains a coding error that produces incorrect premiums. Kaveri argues that Rohan must have supplied the work with reasonable skill and care. On what basis would a court most likely accept Kaveri's argument?

A court would likely accept it because a term requiring reasonable skill and care is normally implied by law when services are supplied in the course of business. The contract's silence does not remove it, and the coding error would be a breach, not a ground for voidness.

  1. ABecause every contract must be in writing to contain a duty of care
  2. BBecause a term to perform services with reasonable care and skill is normally implied by law where the supplier acts in the course of businessCorrect
  3. CBecause the term can only arise if Kaveri pays an additional fee for quality
  4. DBecause courts never enforce a contract unless quality is an express term
  5. Because the error automatically makes the contract void from the start

Explanation

Where a professional supplies services in the course of business, the law implies a term that they will be performed with reasonable skill and care, even if the contract is silent. Kaveri need not point to an express clause. The error does not make the contract void; it gives rise to a remedy for breach of the implied term.

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