4.  Misrepresentation

4.1   Flawed Consent

If the consent of either party is sufficiently flawed, a contract is void or voidable, as the case may be. Consent is void if one party is fundamentally mistaken about the subject-matter (below V); in practice, the possibility of a void contract is theoretical because operative fundamental mistake at the time of contracting is uncommon in liability insurance.

Consent is voidable by one party if that party was induced by the other to contract on the basis of wrong information (misrepresentation) or insufficient information (nondisclosure).165 In theory, the party, whose consent is flawed, may be either the insured or the insurer but usually it is the insurer; and the question of flawed consent arises, not when the contract is concluded but when the insurer is subsequently notified by the insured of a claim by a third party or of circumstances which may give rise to such a claim against the insured, thus raising the possibility of a consequential claim against the insurer.

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