Implied Terms example essay topic

The first step to answering this question is to define what is meant by "express" and "implied" terms in the context of a contract. A contract contains a number of terms which, in effect, are the obligations of the contract. Express terms are statements actually made by one of the parties, either in writing or orally. They do not always make up the whole contract and there may be other terms which can be implied into it.

The basic principle of implied terms is that a term will be implied where it is necessary in order to bring the contract into line with the presumed intention of the parties. This is not to say that the courts are in the business of making reasonable deals for contracting parties, but rather that they have the power to supplement, or complete, an incomplete agreement. A term is not implied because it is reasonable to imply it, rather once it has been decided to imply a term, the content of that term must be reasonable. The golden rule is that implied terms cannot be read in where this would be inconsistent with the express terms of the agreement.

An early case which is often cited is that of The Moorcock (1889, C.A. ), in which the court held that there was an implied term in the contract between the wharf owners (defendants) and shipowners (plaintiffs) that the river bottom at the jetty where the Moorcock was moored was "so far as reasonable care could make it, in such a condition as not to endanger the ship". The ship was indeed damaged at low tide and although there was no express term that the berth would be safe, the shipowners were awarded damages. An implied term can evolve into a rule of law if it has become well settled by a series of judicial decisions in similar circumstances. This is evident in employment contracts where many matters which were originally implied terms have become duties imposed by law. These are both duties imposed o the employer and employee; for employers: to provide work, to pay wages, to indemnify the employee, mutual respect, to provide for the care and safety of the employee.

For employees: to obey lawful and reasonable orders, to act faithfully, to use skill and care, not to take bribes or make second profit. Terms may be implied on the basis of statute, custom or trade usage; by the courts, case law (where precedent establishes that there are standard implied terms in a certain type of contract) or on an ad hoc basis in the particular situation. In modern law, there is a division of opinion about the basis on which the courts can read in implied terms of an ad hoc nature. Lord Denning famously canvassed the view that the courts should be permitted to imply terms "where it is reasonable to do so". The opposing, 'narrower', traditional view (favoured by the Court of Appeal and the House of Lords) is that the courts are authorised to imply terms only where it is necessary to do so "in order to effectuate the parties' intentions". When the courts analyze a situation to see whether there are any implied terms, they use a procedure to help them, particularly derived from the cases of Orman vs. Saville Sportswear (1960) and How man&Sons vs. Blythe (1983).

Is it necessary to have a term to give business efficacy to the contract If the answer is yes the court will imply a reasonable term; 'reasonableness' can be based on: -the presumed agreement of the parties -the conduct of the parties -the custom in the workplace / industry /locality -by the courts (example: in Devon ald vs. Rosser & Sons (1906), it was decided that the employer had to pay full wages to his employees even when there was no work for them unless the provision of work was beyond his control. The duty to pay is a rebuttable presumption. The strict proof required before a term will be implied has made it almost impossible to imply a term incorporating future collective agreements, or even an existing recognition agreement. In Faithful vs. Admiralty (1964) it was held that a custom of applying collective agreements spanning 40 years did not suppose a term that all future collective agreements were incorporated. It only showed that the employer had accepted the advice rendered to him via the agreement; it did not mean he had bound himself to accept all future advice. In Gallagher vs. Post Office (1970) it was held that it was not necessary, on grounds of business efficacy, to imply the incorporation of a recognition agreement.

It is not enough that the term should be reasonable; it must be both obvious and necessary Some implied terms develop from being terms implied by courts to being terms implied by statue. This transition commonly, though not always, follows many years of common law implied terms. For example, in the Sale of Goods Act 1979, two important implied conditions were that goods shall be of merchantable quality and that goods shall be reasonably fit for the purpose for which they are being bought. Initially, both of these could have been excluded but now, the Unfair Contract Terms Act 1977 makes their inclusion compulsory by means of statute. The implied term of reasonable fitness is absolute, in the sense that the seller is liable for breach even if he has not at all been negligent.

This absolute form relating to Sale of Goods Act can be applied to contracts other than for the sale of goods, eg, those for hire and those for repair, when the contractor is said to be under "strict liability". Where the implied term has developed independently of Sale Of Goods Act it takes a qualified form, for example, a carrier of passengers is not absolutely liable, he has only "negligence liability.".