UK: What’s In A Name? The Effect Of A Basis Of The Contract Clause

Last Updated: 25 March 2013
Article by Carol Searle and Joanna Bailey

The Technology and Construction Court decision of Mr Justice Akenhead in Genesis Housing Association Ltd v Liberty Syndicate Management Ltd for and on behalf of Syndicate 4472 at Lloyd's1provides a useful reminder of the consequences of providing inaccurate information in a proposal form where that information forms the basis of the contract. It confirms that the basis clause in a proposal form converts statements on a proposal form to warranties. It also considers the impact of a declaration in a proposal form as to the belief of the signatory as to the correctness of the information supplied.


Time and Tide (Bedford) (TTB) owned the freehold to an office block in Bedford that had planning permission for redevelopment for residential use. TTB was part of a group of companies owned or at least run by two brothers, Graham and Perry Gamby. TTB granted leases to Genesis Housing Association (Genesis) to be rented on a social rent basis. TTB was engaged as the builder to carry out the development. Liberty Syndicate underwrote Premier Guarantee insurance for the development, via its underwriting agent MD Insurance Services Ltd (MD), which included insurance against the builder's insolvency.

The proposal form wrongly identified the builder as Time and Tide Construction Ltd (TT Construction). It contained a declaration that "I/we declare that to the best of my/our knowledge and belief, the information I/we have given is correct and complete in every detail and I/we have not withheld any material fact." It also contained a basis clause - "...this proposal form and the statements made therein shall form the basis of the contract between me/us and the Insurer". The whole of the proposal form was filled out by Mr Johnson of MD, and signed by Mr Graham Gamby for and on behalf of TTB and Genesis. It was common ground that TTB acted as an express or implied agent for Genesis in securing the cover. TTB became insolvent, generating a claim under the policy.

Amongst the issues considered by the court were:

1. Were the facts in the proposal form absolutely warranted as to their truth or did they merely have to be true to the best of the proposer's knowledge and belief?

2. Was the misstatement in the proposal as to the identity of the builder a breach of warranty such that Liberty Syndicates was discharged from liability?

The law

Five principles were drawn from the authorities considered by Akenhead J:

a. It is well established that in principle 'basis of the contract' clauses and warranties are enforceable in law and not contrary to law or public policy.

b. When such clauses or warranties are incorporated within the insurance contract or are stand-alone warranties in the proposal form or other document where a 'basis of contract' expression or declaration is given, they will generally be enforceable.

c. The insurance contract will be void or unenforceable if the insured has innocently signed a document, usually the proposal, as a basis of the insurance contract entered or to be entered into, which confirms (either to the best of the insured's knowledge or belief or absolutely) as true the contents of that document, and the contents are in fact, untrue.

d. A 'basis of contract' declaration or warranty may, as a matter of construction under the ordinary principles of contractual interpretation, be modified or amended, or rendered of no or limited effect, by the contract of insurance itself.

e. In the case of an individual person, declarations said to be true or correct to the best knowledge or belief of the declarer will often be reviewable by reference to the honesty of that person in making the declaration (in Economides v Commercial Union Assurance Co plc2a son declared on a proposal form the value of various items to the "best of his knowledge and belief". The value was double what had been declared by the son. The information he had given was based on what his father had told him. It was held that his basis of belief did not have to be an objectively reasonable one, the information from his father was a sufficient basis for his representation. His duty was that of honesty).

f. In the case of a corporate organisation making a wrongful declaration as to various statements being true to the best of its knowledge and belief, the court must look at, corporately, what it is likely to have known when it made the declaration (taking into account the knowledge of the insurance buyers and of the company's directing minds and enquiries that it would have been reasonable for them to have made). There does not have to be dishonesty as such on the part of the organisation but, if that organisation actually knows something said to be true on the declaration is in fact wrong, then it is making a statement which is not true to the best of its knowledge and belief.

The decision

It was accepted that the misstatement was a negligent error that was inserted by MD which then went unnoticed by TTB when it signed the proposal. It was found that both TTB and Genesis must have realised at the date the proposal form was signed that the builder was not to be TT Construction.

Consequently, Genesis was, through TTB, saying something that was not true to the best of its belief.

Genesis argued that the two parts ((1) the declaration as to belief, and (2) the basis provision) were linked and that the basis clause was confined to statements made in the absence of belief. In other words, what Genesis was saying in context was "so far as I know, the name of the builder set out in the proposal is correct".

Akenhead J rejected this, holding that these were separate provisions. The second part - the basis clause - was not limited by the "best of... knowledge and belief" in the first part. The declaration does not say "I declare that in filling out and signing this form I have acted honestly"; it is saying "so far as I know and believe the builder is TT Construction." As Genesis knew the builder was not TT Construction this could not be true to the best of its knowledge and belief.

There was a breach of warranty and the insurer was discharged from liability.


Insureds must take care when checking and signing proposal forms. The individuals involved in this case would have, if they had thought about it at the time, realised that TTB was to be the builder. Akenhead J concluded that Mr Gamby "was at worst confused or more likely simply did not properly read the form". Even if the error is entirely innocent, it could give rise to a breach of warranty.

The fact that a statement on a proposal form can be converted into a warranty using 'obscure words' that most insureds will not understand has long been subject to criticism and made the 'basis clause' a target for reform. Amongst the proposals made by the Law Commissions' June 2012 Consultation Paper on 'The Business Insured's Duty of Disclosure and the Law of Warranties' is that insurers should be prevented from using basis of the contract clauses to convert statements into warranties.


1. [2012] EWHC 3105 (TCC )

2. [1998] Lloyd's Rep IR 9

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.