Which principle states that a contract will only exist with a legal interest in the property?

The Macaura principle is tied to the concept that a person must have a legal interest in the property involved in an insurance contract for that contract to be valid. This principle came from the case of Macaura v. Northern Assurance Co Ltd, where the court established that only the owner of the property has the insurable interest in that property.

This means that if an individual does not legally own an asset, they cannot purchase insurance on it, as they would not suffer a loss should damage or loss occur. Hence, the principle ensures that insurance is only available to those who have a legitimate stake in the property, safeguarding the integrity of insurance contracts and reducing the likelihood of moral hazard, where someone might benefit from the loss of property they do not legally own.

The other principles listed, such as reliance, indemnity, and utmost good faith, pertain to other aspects of insurance contracts but do not specifically address the essential requirement of having a legal interest in the property to establish a valid contract. The reliance principle deals with the idea that a party must rely on the information provided for a contract, the indemnity principle relates to compensation being limited to the actual loss suffered, and the utmost good faith principle requires all parties to act honestly and disclose