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

After all, in a broad sense all terms of the contract are in some way
related to the price or remuneration. That is not what is intended. 95
2.79 First National Bank itself was about the terms of a loan. Clearly, the interest rate
itself was the price (and not subject to review) but a clause stating that the same
rate was payable on default was merely incidental to the substance of the
bargain. The House of Lords held it was subject to review. A price escalation
clause would also be subject to review “or there would be a gaping hole in the
system” 96 (even if, presumably, the supplier had taken account of the presence of
such escalation clause in calculating the initial price).
Do exceptions define “the main subject matter of the contract”?
2.80 Although an exception to the cover is not a price term, there is a strong argument
that it does define the main subject matter of the contract, within the meaning of
Article 4(2). Clearly, the main subject matter of an insurance contract is the cover
the policyholder receives. MacGillivray considers that the exemption extends to
terms which describe the perils insured against and specify the measure of
indemnity afforded by the cover, but not to procedural requirements to give notice
of claims. 97 Birds and Hird also argue that the definition of the main subject
matter should be taken to include both “the risks covered and excepted”. They
point out that the Regulations must be read subject to Recital 19, which refers to
terms which “clearly define or circumscribe the insurer’s liability”. 98
2.81 This was the view taken by Mr Justice Buckley in Bankers Insurance Co v
South. 99 A holiday-maker had taken out a travel insurance policy which exempted
“compensation or other costs arising from accidents involving … possession of
any … motorised waterborne craft”. Whilst riding a jet ski he had been involved in
an accident which seriously injured another jet skier. The victim then attempted to
argue, first, that the exemption did not apply to jet skis. Secondly, if it did, it was
an unfair term within the meaning of the regulations. Buckley J held that the term
was in plain intelligible language and therefore exempt from scrutiny. 100
Unfortunately for our purposes, he did not develop this point. The judge also said
that in any event he could see nothing unfair in the term. It was available to the
holiday-maker, and he could have read it if he had wished. He also pointed out
that the insurance was relatively cheap. 101
95 Above at [34].
96 Above at [34] by Lord Steyn.
97 th
J Birds and N Legh-Jones, MacGillivray on Insurance Law (10 ed 2003) para 11-36, p
294 and para 10-91, p 261.
98 J Birds and NJ Hird, Birds Modern Insurance Law (6 th ed 2004) p 208, note 24.
99
[2003] EWHC 380 (Comm), [2004] Lloyd’s Rep IR 2.
100 Above at [24].
101 Above at [24].
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