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Doctrine of utmost most good faith means that each party to a proposed contract is under a duty to disclose to the other all information which would influence his decision to enter into the contract, whether such information is requested or not. Failure to disclose material information gives the other party the right to avoid the contract.
nThe duty to disclose all the material facts or information rests more heavily on the insured than the insurer because the insured knows more about the subject matter of the insurance. Insurance contract is based upon mutual trust and confidence between the insured and and the insurer. That’s why insurance contract is said to be uberrimae fidei, i.e. of the utmost good faith.
nA person is only required to disclose material facts. If a fact is not material, non-disclosure does not affect the validity of the contract.
nThe test of material facts is whether the facts would influence the mind of a prudent insurer in deciding whether to accept the risk, and if so, at what premium.
Case: Goh Chooi Leng v. Public Life Co. Ltd. [1964]
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A life insurance contract was made with the defendant company. The plaintiff made a false statement in the insurance policy. In the previous occasion the plaintiff was treated for pulmonary tuberculosis.But he did not disclose this information in the policy. So, the insurance company denied to pay the insurance money.
nHeld: The contract is voidable for non-disclosure of material information.
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