The principle of utmost good faith is a core principle in insurance law, mainly applied in international cargo transportation insurance in foreign trade. It requires the insured and the insurer to disclose all material facts to each other when concluding an insurance contract, and not to conceal or misrepresent. Usage scenarios include: the insured must proactively inform the nature of the goods, packaging, voyage, vessel name, etc.; the insurer must clearly explain exemption clauses. Notes: If this principle is violated, the insurer may declare the contract void and refuse to pay claims. Difference from other terms: It imposes a higher requirement than 'good faith' in general contract law, emphasizing proactive disclosure rather than merely not committing fraud. Foreign trade practitioners should ensure that insurance information is true and complete to avoid claim failure due to negligence.
📝 Examples
1. When insuring against all risks, the seller must follow the principle of utmost good faith and truthfully disclose that the goods contain flammable liquid; otherwise, the insurance company has the right to refuse compensation. (Note: Emphasizes the obligation to proactively disclose material facts)
2. When filling out the insurance application, the buyer failed to disclose that the goods would be transshipped to a war-torn area, violating the principle of utmost good faith, which led to the invalidation of the insurance contract. (Note: Demonstrates the consequences of violating this principle)
💡 Foreign Trade Tips
Foreign trade terms are the foundation of international business communication
Trade practices may vary slightly by country; pay attention when using them
When using terms in contracts, specify the applicable version (e.g., Incoterms 2020)
For unfamiliar terms, use GlobalSync's multilingual email helper to confirm with your partner