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Report No. 85

2.5. Tripartite character.-

It should be pointed out that as a result of the provisions made in this Chapter, a transaction of insurance assumes a tripartite character. Normally, insurance, like any other contract, creates a legal link only between the parties to the transaction. The rights of third parties are only against the person insured, there being no direct cause of action in favour of the third parties against the insurer. To this, an exception is created by Chapter 8, the principal provision material in this regard being section 96(1), which deals with the duty of the insurer to satisfy a judgment against persons insured in respect of third party risk. Of course, this broad proposition is to be read subject to the limits of liability as imposed in section 95(2), and is applicable only in respect of that liability which is within the fold of section 95(1). But the point to be noted is that sections 94-96 make an inroad on the common law rule that a third party cannot derive benefit under a contract.



Claims for Compensation under Chapter 8 of the Motor Vehicles Act, 1939 Back




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