Implied Terms

12 Key excerpts on "Implied Terms"

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  eBook - ePub

  Using Commercial Contracts

  A Practical Guide for Engineers and Project Managers

  • David Wright(Author)
  • 2016(Publication Date)
  • Wiley

    (Publisher)

  But even the most precisely drafted contract may at some point depend upon an implied term even if it only uses words which, for instance, refer to ‘normal practice within the industry’. What the parties are doing is simply agreeing to leave something undefined, and therefore implied, and relying upon being able to define it later if needed.

  Law allows other terms to become part of the contract in addition to those specifically included in the successful offer or agreed between the parties. Terms may be implied into a contract for a number of reasons.

  They may be terms that –

  • the parties did have in mind but did not bother to put into words because they were so obvious – a typical example might be the purchase of furniture in a shop ‘to be delivered’, when it would be implied that the goods should be delivered by the shop reasonably soon after purchase;
  • the parties are presumed to have had in mind but which they did not put into words; for an example see The Moorcock (1889) below;
  • make a particular contract work properly; for an example see Shirlaw v. Southern Foundries Ltd (1939) below;
  • make a class of contracts work properly or fairly; for an example see Liverpool City Council v. Irwin (1977) below; or
  • the law thinks ought to be implied for the sake of fairness or public policy, such as the terms implied under the Sale of Goods Act.

  The ‘standard textbook’ definition is that terms may be implied into the contract by custom, by the court or by law, by statute, or where a ‘course of dealing’ has been established between the parties.

  8.2 Implied Terms

  Terms implied by ‘custom’

  Terms may be implied into a contract by custom – the customary practice within a particular business, trade or type of transaction.

  In particular, a number of trading markets operate with their own rules, especially where they have to contend with large volumes of contracts made within tight timescales and cannot allow more than the absolute minimum time to agree each deal. Lloyds, the Stock Exchange and various commodity markets are obvious examples of this, each having their own customary terms of payment, settlement dates and so on.

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  eBook - ePub

  Unlocking Contract Law

  • Chris Turner(Author)
  • 2014(Publication Date)
  • Routledge

    (Publisher)

  L’Estrange v Graucob

  6.3  Implied Terms implied term A term that is implied into a contract rather than being included by either party 6.3.1  The process of implying terms into a contract Generally, the parties to a contract will be deemed to have included as express terms of the contract all of the various obligations by which they intend to be bound.

  There are, however, occasions when terms will be implied into a contract, even though they do not appear in a written agreement or in the oral negotiations that have taken place leading up to the contract.

  Terms will be implied into a contract for one of two reasons:

    Because a court in a later dispute is trying to give effect to a presumed intention of the parties, even though these intentions have not been expressed (these are terms implied by fact).

    Because the law demands that certain obligations are to be included in a contract irrespective of whether the parties have agreed on them or would naturally include them (these are terms implied by law – usually this will be as the result of some statutory provision aimed at redressing an imbalance in bargaining strength or seeking to protect a particular group, for instance consumers or employees, but it can also arise as a result of operation of the common law).

  6.3.2  Terms implied by fact

  Where terms are implied by fact, this is usually as a result of decisions in individual court cases. The courts have Implied Terms by fact in a variety of different circumstances. In all cases, what the court is trying to do is to give effect to the presumed intention of the parties at the time the contract was formed.

  Terms implied by custom or habit

  There is an old maxim that ‘custom hardens into right’. In other words, if something has happened in a particular way over a long period of time then it is likely that it will be established that it has evolved into an actual and enforceable right. Much of the early common law was based on local custom. For instance, customary rights gained by long use, otherwise known as prescription, are common features in relation to the use of land. Bridle paths and public rights of way are an example of this. The same principle can be adopted where parties contract but are silent on features that may in any case be accepted as established custom.

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  Optimize Contract Law

  • Kathrin Kuhnel-Fitchen, Tracey Hough(Authors)
  • 2017(Publication Date)
  • Routledge

    (Publisher)

  This is where Implied Terms come into play: Implied Terms are those terms which have not been expressly agreed between the parties but which may, or in some certain circum-stances must, be read (‘implied’) into the contract to supplement the expressly agreed obligations outlined in the contract and which thereby make up for the (deliberate or accidental) omissions of the parties. Implied Terms can be differentiated into four groups: ❖ Terms implied by statute (sometimes also called ‘Terms implied by Parliament’). ❖ Terms implied at common law (sometimes also called ‘Terms implied in law’). ❖ Terms implied in fact. ❖ Terms implied by custom/trade usage. Categories of Implied Terms Terms implied by statute/Parliament: Terms which are implied into a particular type of contract regardless of the parties’ intentions by operation of statute. Terms implied at common law: Terms which are implied irrespective of the intentions of the parties as the implication is based on the type of contract. Terms implied in fact: Terms which are imputed from the intentions of the parties, i.e. it is assumed that the parties would have intended to include such a term if they had thought about it. Terms implied by custom/trade usage: Terms which are implied into a contract from the usage or custom of the industry or market in which the parties transact. Terms implied by statute/Parliament Terms implied by statute (sometimes also called ‘terms implied by Parliament’) are those terms which, usually regardless of the parties’ intentions (see ‘Exemption of terms’ below), are implied into a particular type of contract as a result of legislative intervention by means of a statutory provision, i.e. Parliament has decided that certain terms should be implied into all contracts of a particular type.

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  Understanding Contract Law

  • Max Young(Author)
  • 2009(Publication Date)
  • Routledge

    (Publisher)

  I reach that conclusion … it tends towards certainty in the law. One of the essential elements of law is some measure of uniformity. One of the important elements of the law is predictability. At any rate in commercial law, there are obvious and substantial advantages in having, where possible, a firm and definite rule for a particular class of legal relationship, eg as here, the legal categorisation of a particular, definable type of contractual clause in common use. It is surely much better, both for shipowners and charterers (and, incidentally, for their advisers) when a contractual obligation of this nature is under consideration, and still more when they are faced with the necessity for an urgent decision as to the effects of a suspected breach of it, to be able to say categorically: ‘If a breach is proved, then the charterer can put an end to the contract’, rather than that they should be left to ponder whether or not the courts would be likely, in the particular case, when the evidence had been heard, to decide that in the particular circumstances the breach was or was not such as to go to the root of the contract. Where justice does not require greater flexibility, there is everything to be said for, and nothing against, a degree of rigidity in legal principle.

  9.5 Implied Terms

  In addition to the terms expressly agreed between the parties there are sometimes terms implied into the contract. In such cases, therefore, in order to determine what the exact contract (agreement) is between the parties the express terms AND the Implied Terms must be taken together : together they constitute the one contract between the parties.

  NB Terms can be implied into a contract by custom, statute or by the court.

  9.5.1 Terms implied by custom

  In many ‘trades’ or areas of business there are to be found customs of various sorts. These customs can include ‘legal’ customs which have the effect of implying terms into a contract. To imply a term into such a contract the custom must be ‘notorious, certain, legal and reasonable’.

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  Architect's Legal Handbook

  The Law for Architects

  • Anthony Speaight, Gregory Stone(Authors)
  • 2014(Publication Date)
  • Butterworth-Heinemann

    (Publisher)

  6.17 This topic leads on naturally to the next. Once it is established that a contract exists, what are its terms? 7 Terms of a contract Express terms 7.01 The most obvious terms of a contract are those which the parties expressly agreed. In cases where there is an oral contract there may be conflicting evidence as to what actually was said and agreed, but with the written contracts with which architects will most often deal, construing the express terms is usually less problematic: just read the document evidencing the contract. The 'four corners rule' restricts attention to within the four corners of the document, and even if the written terms mis-state the intention of one of the parties -perhaps that party had not read the document carefully before signing it - he will be bound by what is recorded save in exceptional circumstances. This is another manifestation of the objective approach of English contract law discussed above. 7.02 It should be noted at this stage that things said or written prior to making a contract may affect the parties' legal obligations to one another even though they are not terms of the contract. This matter is discussed in the section on misrepresentation. Implied Terms 7.03 Implied Terms are likely to catch out the unwary. There are three types of implied term: those implied by statute, those implied by custom, and those implied by the court. Terms implied by the court 7.04 With unfortunate frequency constracting parties dis-cover too late that their contract has failed to provide for the events which have happened. One party will wish that the contract had included a term imposing liability on the other in the circumstances that have turned out, and will try to persuade the court that such a term in his favour should be implied into the contract, saying, in effect, that the court 12 The English Law of Contract ought to read between the lines of the contract and find the term there.

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  Commercial Contracts

  A Practical Guide to Deals, Contracts, Agreements and Promises

  • Chris Thorpe, John Bailey(Authors)
  • 1996(Publication Date)
  • Woodhead Publishing

    (Publisher)

  Another way of putting this is that, to be implied, a term must be so obvious that it goes without saying. So it is not enough that that term would have been a good idea or that prudent parties would have included it: a term will only be implied if the contract is unworkable without it. There is of course no need for an implied term about a matter which the parties have expressly agreed. If in our example the parties had agreed that the document was to be carried on an aeroplane flying from Manchester to Southampton via Rio de Janeiro, there is no room for Implied Terms as to the means of transport or the route. 4.7.3 Customary terms There is one other situation in which the parties may be taken to have intended a particular term or terms to be included even though they did not expressly say so. This is where it is the custom in the trade or business concerned, in a contract of that type, to deal on those terms. So custom, which as discussed in section 3.3.2 is important in relation to the formation of a contract, can also have a bearing on the terms of a contract. A party who claims that a term is to be implied on the basis of custom is saying in effect that the term was so universal and there-fore so obvious to both parties, at the time the contract was made, that it was not even worth mentioning. That custom will have to be very well established indeed if such an implication is to be justified. It is not enough that that term is commonly or usually found in contracts of that type. 4.7.4 The practical significance of Implied Terms As we saw in our example, where the parties have agreed only the basic terms of the contract, the law will supplement those express terms with such Implied Terms as are necessary to make the con-tract workable. With common types of contract such as contracts of carriage and contracts for the sale of goods, the terms which are to 99

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  Unlocking Employment Law

  • Chris Turner(Author)
  • 2013(Publication Date)
  • Routledge

    (Publisher)

  7Implied Terms

  Aims and Objectives

  After reading this chapter you should be able to:

  • ■ Understand the nature of Implied Terms and how terms are implied into contracts by statute or by common law
  • ■ Understand why the common law implies terms into employment contracts
  • ■ Understand the duties owed by employers to employees
  • ■ Understand the duties owed by employees to employers
  • ■ Be able to critically analyse the concept of implied duties
  • ■ Be able to apply individual categories of Implied Terms to factual situations

  7.1 The process of implying terms

  7.1.1 The nature of Implied Terms

  As we have already seen, while employment law is an area that is heavily influenced by statute as well as by EU law it is also in essence a specific area of contract law. All contractual relationships are based on terms either agreed by the parties before entering the contract or implied by process of law by the courts or by statute.

  All Implied Terms are of two types:

  Statutory Implied Terms in the employment contract

  Implied Terms appear throughout contract law and, because of the nature of the employment relationship, have a significant role to play in employment law. Employment law, and in particular employment protections, have traditionally been subject to regulation by statute and subject also to continuous change. Inevitably this reflects the different attitude of conservative and socialist governments to employment. Many of the subsequent chapters of this book in effect deal with the insertion of terms into employment contracts through statutory intervention and by which both parties to the contract are bound. A classic example of a statutory implied term is the insertion of the so-called 'equality clause' into all contracts of employment by s1(1) of the Equal Pay Act 1970, which has now been overtaken by the Equality Act 2010 to reflect developments in EU law.

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  Commercial Contract Law

  Transatlantic Perspectives

  • Larry A. DiMatteo, Qi Zhou, Severine Saintier, Keith Rowley(Authors)
  • 2013(Publication Date)
  • Cambridge University Press

    (Publisher)

  Decisions which decline to imply a term are as telling about the tech- nique’s tendency to secure good faith outcomes as those in which a term is actually implied. I. Introduction This chapter will consider the development and role of the implied term in English law. This topic raises questions that are historical, theoretical and practical in scope. The implied term has a long history in English contract law. So long, in fact, that it is not feasible to establish when or in what area of law it made its first appearance: the frequent tendency of the old judges (or perhaps just the old reporters) to omit any reference to authority when stating the law 1 is very unhelpful for the would-be historian attempting to trace from case to case. The best we can do, really, is to look for the earliest incidences we can find. We can also, with some hesitation, speculate 10 Implied Terms in English Contract Law Richard Austen-Baker 1 Indeed, also unhelpful is the tendency of old reporters simply to make up the judge’s reasoning to make the case support and illustrate a particular principle (in much the same way a modern textbook writer offers hypothetical scenarios supported by a reference to a real case on very different facts), hence, we believe, the notorious differences in reasoning reported in the Campbell and the Espinasse reports of Stilk v. Myrick. Richard Austen-Baker 226 based on the language employed by judges when speaking of particular Implied Terms and combine this with what we know about the social importance of particu- lar areas of law at different times. The theoretical basis is problematic in that the phenomenon of the implied term can be justified in different ways according to one’s preferred standpoint. Some, but not all, of these can be reconciled with the history we know or can reasonably confidently construct.

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  Contract Law

  Principles and Context

  • Andrew Stewart, Warren Swain, Karen Fairweather(Authors)
  • 2019(Publication Date)
  • Cambridge University Press

    (Publisher)

  The concept of a term implied by law really only became an established part of English (and in turn Australian) law after Lister v Romford Ice (1957), a case dealing with an employee’s implied duty to take care not to injure anyone in the course of their work. By that stage, there were many legal rules about the performance of contracts that could be, and duly were, rationalised as Implied Terms. 34 In principle, the categories of contract into which terms may be implied by law ‘are not closed’: see Castlemaine Tooheys at 487. The possibility of identifying a new term is illustrated ................................................................................................................................................................................................................................. 34 See Peden 2013. Chapter 9: Terms and obligations 175 III by Liverpool City Council v Irwin (1977). The House of Lords held that the landlord of a high- rise apartment block was under an obligation to keep the common areas of the building, including the stairwells and lifts, in a state that was reasonably fit for the tenants’ use. In recent years, however, the High Court has come to insist that a term should only be implied by law where it is strictly necessary to ensure that the rights created by a contract are not rendered ‘worthless’ or ‘seriously undermined’: see Byrne v Australian Airlines (1995) at 450; Breen v Williams (1996) at 124. The difficulty this poses for the recognition of new terms was illustrated in Commonwealth Bank v Barker (2014). The Court refused to recognise an implied obligation not to do anything that might unreasonably damage or destroy the ‘mutual trust and confidence’ in an employment relationship. This was despite this term having become an established feature of English law after the House of Lords’ decision in Malik v Bank of Credit and Commerce International (1998).

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  Sanctity of Contracts in a Secular Age

  Equity, Fairness and Enrichment

  • Stephen Waddams(Author)
  • 2019(Publication Date)
  • Cambridge University Press

    (Publisher)

  21 The two approaches blend into each other: as Geoff Hall has said, ‘the process [of implication of terms] cannot meaningfully be separated from the law of contractual interpretation. ’ 22 If interpretation cannot be made to yield a result that the court thinks practically necessary, the court has power to imply a term. Lord Goff said, in interpreting a contract to avoid what he considered to be an unjust enrich- ment, ‘if necessary a term will be implied into the contract to that effect.’ 23 What would have made the implication necessary was the perceived prac- tical need to avoid an unjust enrichment, by simple interpretation if possi- ble, otherwise by implication of a term. From a theoretical point of view, interpretation of a text is something entirely different from the implication of a contractual term: the implied term comes from a source other than the actual text. But when the court, in addressing the question of interpretation, is influenced by the thought that if necessary a term will be implied to secure the same practical effect as could be secured by interpreting the text in the way favoured by the court, a sharp distinction becomes impossible to maintain, because the court’s interpretation of the text will necessarily be influenced by the consideration that the same practical result could, should and would have been attained by implying a term. In Aberdeen City Council v. Stewart Milne Group Ltd 24 land had been sold by the City of Aberdeen to a developer. A clause in the sale contract 20 Marks and Spencer plc v. BNP Paribas Services Trust Co (Jersey) Ltd [2015] UKSC 72, [2016] AC 742. 21 Attorney General of Belize v. Belize Telecom Ltd [2009] UKPC 10, [2009] 1 WLR 1988. 22 Geoff R. Hall, Canadian Contractual Interpretation Law 3rd edn (LexisNexis, 2016) para. 4.1. See also Hugh Collins, ‘Implied Terms: The Foundation in Good Faith and Fair Dealing’ (2014) 67 Current Legal Problems 297, 309–13.

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  Contract Law

  Cases and Materials

  • Kenneth Yin, Simon Kozlina, Kelly Green, Luca Siliquini-Cinelli, Emmanuel Laryea, Lisa Spagnolo(Authors)
  • 2020(Publication Date)
  • Cambridge University Press

    (Publisher)

  PART III CONTRACTUAL OBLIGATIONS 249 III 9 TERMS AND OBLIGATIONS 251 9.1 Overview Determining the enforceable promises of a contract is one of the key skills of a legal practi- tioner. Once questions of formation are resolved, the scope of the terms incorporated by the parties is key to the effective resolution of disputes. Terms are often characterised in different ways, depending on the context. In terms of incorporation, one relevant division is between express terms (promises explicitly considered by the parties) and Implied Terms (promises included in the contract but not expressly considered by the parties). Another division, within express terms, is whether terms are included through various methods of incorporation or via statements made before the contract is formed. Another method of classification is between essential and non-essential terms; although this issue, which flows into questions of rights of termination, is considered in more depth in Chapter 16. Another source of enforceable promises in some contracts is the consumer guarantees imposed by the Australian Consumer Law. This chapter examines each of these sources and classifications.

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  Commercial Law and Commercial Practice

  • Sarah Worthington(Author)
  • 2003(Publication Date)
  • Hart Publishing

    (Publisher)

  So we turn to the legal test that we propose that courts should employ when a party is charged with violat-ing an implied duty of fair dealing and good faith. 172 William Allen and Galya Levy The first and nearly universally accepted rule is that an implied duty must be construed to be consistent with the express terms of the contract. 16 This rule is an important protection against the costly ambiguity that might exist were courts encouraged to re-write the parties’ allocations of risks in a written contract. Where the parties themselves expressly address a topic, absent deception, mistake that justifies relief, or other ground for relief, their allocation of rights and duties must be respected if the fundamental utility of the institution is to be protected. This principle constrains the risk of costly ambiguity that judicial construction ex post of unstated duties may create. In our view this foundation limitation on judicial action is primary. Second, assuming that a fair reading of the rights and obligations created in the contract does not clearly provide an answer to a dispute arising from contract, one must ask whether either party is under a duty that is unex-pressed in the contract, but is consistent with the express agreements that have been made. In answering this question courts tend to fall into one or two conceptual camps. The first approach looks to the traditional doctrine of contract law. For those who occupy this position the fact that a court is implying an agreement forces them to focus imaginatively on the moment of contracting. They appreciate that the parties must have understood that they did not perceive all of the forces that might and would over time work upon the relevant environment for their agreement. The parties likely cre-ated some protections against unforeseen developments (a contract term or a termination right, a process for re-pricing, etc), but in this view the par-ties knew also that they did not have perfect information.

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