‘Basis of contract’ clauses and warranties

Genesis Housing Association Ltd v Liberty Syndicate Management Ltd [2012] EWHC 3105 (TCC), [2012] All ER (D) 150 (Nov)

It is well established that, in principle, ‘basis of contract’ clauses and warranties in relation to insurance are enforceable in law and not contrary to law or public policy. The enforceability would generally come about either by such clauses or warranties being incorporated within the contract of insurance or as a stand-alone warranty by the insured given to the insurer through the proposal form or other document in which the ‘basis of contract’ expression or declaration was given. If the insured had innocently or otherwise signed a document, usually the proposal, as the basis of the insurance contract entered or to be entered into, which confirmed (either to the best of the insured’s knowledge or belief or absolutely) as true the contents of that document, the insurance contract would be void or unenforceable if the contents were untrue. The contract of insurance, whether contained in the policy itself or any other documents such as the quotation or a certificate of insurance, might as a matter of construction modify, amend or even render of no or limited effect the ‘basis of contract’ declaration or warranty. The ordinary principles of contractual interpretation would apply to that exercise. Declarations said to be true or correct to the best knowledge or belief of the declarer would often be in the case of an individual person reviewable by reference to the honesty of that person in making the declaration.