Misrepresentation, Non-Disclosure and Breach ... - Law Commission

8.107 Scots law has not developed a classification equivalent to the English law
distinction between waiver by election and waiver by estoppel. The decision of
the House of Lords in Armia Ltd v Daejan Developments Ltd 53 has generally been
regarded as authority for the proposition that a party relying on the other party's
abandonment of a right must demonstrate that he has conducted his affairs on
the basis of the waiver, although he need not go so far as to show that he has
suffered prejudice as a consequence of relying upon it. 54 In reaching this
decision, the House of Lords referred to certain English authorities while
cautioning that the Scots law of personal bar should not be assumed to be the
same as the English law of estoppel.
8.108 We think that if the change we have suggested to section 33 is put into effect, so
that the contract is not discharged automatically by a breach of warranty but the
insurer has the right to repudiate (or, as some prefer to say, terminate) for
breach, the question of whether the insurer is precluded by its subsequent
conduct from exercising that right can be left to the general law of contract. Thus
in English law, for example, the insurer might lose its right by either affirmation or
estoppel. We think this is just. There is a case for allowing an insured to found
upon a waiver by the insurer without having to show that they relied on the
representation. Where an insurer who is aware of a breach expressly states that
it does not insist upon its rights, it is difficult to see why an additional requirement
of proving reliance should be imposed upon the insured. 55 The same may be said
where the waiver is clear from actions of the insurer.
8.109 We do not think it is necessary to include a specific provision on this point in any
new legislation, but we would welcome views on the point.
8.110 We provisionally propose that loss by waiver of the insurer's right to
repudiate the contract should in future be determined in accordance with
the general rules of contract. We welcome views on whether it is necessary
to include a specific provision on this point in any new legislation.
53 1979 SC (HL) 56.
54 Above at 68-69 by Lord Fraser of Tullybelton and 71-72 by Lord Keith of Kinkel.. See eg
Moodiesburn House Hotel Ltd v Norwich Union Assurance Ltd 2002 SLT 1069.
55 This requirement in Scots law (see above) has been questioned (in non-insurance cases)
in Presslie v Cochrane McGregor Group Ltd 1996 SC 289 and Howden (James) & Co Ltd
v Taylor Woodrow Property Co Ltd 1998 SC.
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