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

2.65 Cases such as Kler Knitwear provide a partial solution to the problem of
warranties. We have been told that the courts’ approach to construction
discourages insurers from taking purely technical points or attempting to use
warranties in a wholly unreasonable way. However, it does so at the cost of
introducing uncertainty and confusion into the law. As each clause must be
interpreted on its own wording, it encourages similar issues to be litigated
repeatedly. And in some cases, the reasoning required to produce a fair result is
convoluted to the point of incomprehensibility. 72
Implied warranties
2.66 In marine insurance, the law will also imply certain warranties into the contract.
The most important implied warranty is that of seaworthiness. 73 The other implied
warranties cover portworthiness, 74 cargoworthiness 75 and legality. 76 The 1906 Act
also implies into a marine policy a number of conditions which operate in the
same way as warranties, in that the risk may never attach or the insurer may be
discharged from liability. They relate to commencement of the risk; 77 alteration of
the port of departure; 78 sailing for a different destination; change of voyage; 79
deviation; 80 and delay. 81 Because of their specialised content, relating only to
marine insurance, these implied warranties and conditions fall outside the scope
of this paper, save that we consider the effects of a breach or the occurrence of a
condition. 82
BASIS OF THE CONTRACT CLAUSES
2.67 A basis of the contract clause is a legal device used to turn representations made
in the proposal form into warranties. Typically, applicants are asked to sign a
proposal form containing a clause declaring that they warrant the accuracy of all
the answers they have given. The clause usually states that the answers “form
the basis” of the contract.
72 This criticism has been levelled particularly at the Supreme Court of Canada decision, The
Bamcell II, cited in Kler Knitwear, and discussed in Part 5. Soyer comments that since the
Bamcell II, “the legal status of certain clauses in marine insurance policies has now
become more problematic” as “a weapon has been given to the assured to challenge the
warranty status of certain clauses” (205).
73 Marine Insurance Act 1906, s 39(1) (voyage policies) and s 39(5) (time policies). For
further discussion see Issues Paper 2 Appendix A.
74 Marine Insurance Act 1906, s 39(2).
75 Above at s 40(2).
76 Above at s 41.
77 Above at s 42.
78 Above at s 43.
79 Above at s 45.
80
Above at s 46; see also ss 47 (Several ports of discharge) and 49 (Excuses for deviation
and delay).
81 Above at s 48; see also s 49 (Excuses for deviation and delay).
82 See Part 8 below.
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