A contract is defined as
An agreement between two or more parties
To do or to abstain from doing an act
With an intention to create a legally binding relationship.

Essentials of Commercial Contract :
1) Offer and acceptance
2) Consideration – past, present and future
3) Capacity to contract – Sound mind and major
4) Consensus – Sameness of mind
5) Legality of object
Additional features of insurance contracts
6) Utmost good faith
7) Insurable interest
8) Indemnity (applicable only General Insurance)
Commercial Contract is governed by the principle of "Caveat Emptor" i.e., "Let the buyer beware"
No need to disclose all the facts unless asked for.
But should not mislead or give untrue statements.
Life Insurance Contract is governed by the principle of UTMOST GOOD FAITH. As all the information is known only to the proposer for life insurance he has to disclose all the facts even without being asked for by the insurer. Any non-disclosure or misrepresentation will nullify the contract and all the premiums paid will be forfeited and claim repudiated.
Even stringent medical examination sometimes may not reveal the conditions like high B.P. and diabetes. Hence it is the duty of the proposer to reveal all the material facts.
Utmost good faith can be defined as a positive duty to disclose accurately and fully all facts material to the risk proposed.

Material Fact:
The fact or information that will influence the decision of the underwriter whether to issue the policy or not is material fact. Material fact has to be revealed at all times – at the time submitting proposal, revival and alteration in policy. At the time of giving the proposal, the duty extends up to the date of acceptance.

a) Facts which everyone is supposed to know.
b) Facts of common knowledge
c) Facts which lessen the risk
d) Facts which could reasonably discovered

All risks are not insurable.
To insure, risk must be capable of financial measurement.
Insurable interest is said to exist when the person insuring stands to lose if the event insured against occurs.
Insurable interest is the legal pre-requisite for insurance.

It is presumed that the person has insurable interest in his own life to an unlimited extent.
Spouses have insurable in each other.
Partners have insurable interest on the lives of other partners to the extent of the money invested.
A creditor has insurable interest in the life of debtor to the extent of money lent.
Employers have insurable interest in the lives of employees as long as employment contract continues. Key man insurance and Group insurance comes under this clause.
It is presumed that parents have insurable interest in the life of a child as a CHILD. The rights under the policy will be automatically transferred to the assured child, on the vesting date.
The principle of indemnity will not apply for life insurance contract, as life that is insured cannot be measured accurately by way of money.