02/02/24

Implied Contractual Terms | KANGS Contractual Disputes Solicitors

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A contract is a legally binding agreement between at least two parties and formed according to essential basic principles.

Contracts are formed in every aspect of domestic and commercial life covering activity from, for example, buying or selling services, a car or property.

Within a contract there will exist, whether deliberately incorporated or not, terms and conditions regulating the manner in which that contract is to be fulfilled.

A binding contract may be formed either in writing or orally and, in either case, specific terms agreed by both parties, known as ‘express terms’, may be incorporated.

Additionally, ‘implied terms’ may well form part of the contract even though the parties are unaware of their existence.

These ‘implied terms’ may arise from:

  • Custom or Usage,
  • Case or Statute Law,
  • Fact.

Terms may be implied into a contract where a dispute exists between the parties over the interpretation of a contract or where uncertainty has led to an impasse which requires unravelling.

Stuart Southall of KANGS Solicitors explains the nature and importance of implied terms.

The Team at KANGS offers vast experience and is highly regarded nationwide for assisting clients involved in contractual disputes of every nature, often with a significant international dimension.

Should you require any initial advice, our Team can be contacted as follows:

Terms Implied by Custom or Usage | KANGS Civil Litigation Solicitors

Where sufficient evidence is available of the existence of a relevant custom, whether or not the parties were aware of it when the contract was formed, the Court will, where appropriate, recognise such custom and imply a term which gives it effect.

The Court may imply a term which reflects a custom which is:

  • Notorious
  • Reasonable
  • Legal
  • Certain

Once the custom or usage is proven, the court will incorporate the implied term unless either party objects and is able to prove that it was not intended for the term to be implied.

However, it is irrelevant to show whether parties intended for the term to be implied if there is evidence a custom or usage exists.

Terms Implied by Statute and Case Law | KANGS Commercial Disputes Solicitors

Terms may be implied by both Statute Law and Case Law into many forms of contracts affecting business transactions of every nature.

When considering the circumstances, the court will consider:

  • whether or not the contract is ‘usual’ in that its terms are easily identified,
  • and ensure that the parties have not addressed the term in any way in the contract,
  • whether an implied term will negatively affect or lessen an express term, for example, an implied term will not be incorporated if it lessens a party’s obligations,
  • the test of reasonableness will be applied when appropriate taking into account bargaining power and general policy.

Implied terms are commonly used in contracts for good and services. Typically, in such contracts, there is an implied term that the service performed, or goods delivered are of the required quality for which they were acquired.

Often a party will seek to rely on implied terms to further its case for non-payment for a service or goods, usually alleging that the same did not meet the standards implied by statute.

Statute Law

The Sale of Goods Act 1979 states at section 14:

Implied terms about quality or fitness.

  1. Except as provided by this section and section 15 below and subject to any other enactment, there is no implied termabout the quality or fitness for any particular purpose of goods supplied under a contract of sale.
  2. Where the seller sells goods in the course of a business, there is an implied term that the goods supplied under the contract are of satisfactory quality.

(2A) For the purposes of this Act, goods are of satisfactory quality if they meet the standard that a reasonable person would regard as satisfactory, taking account of any description of the goods, the price (if relevant) and all the other relevant circumstances.’

Similarly, where services are supplied pursuant to a contract as part of a business, it will be an implied term that the supplier will carry out the agreed services with reasonable skill and care.

The Supply of Goods and Services Act 1982 states:

13 Implied term about care and skill.

In a relevant contract for the supply of a service where the supplier is acting in the course of a business, there is an implied term that the supplier will carry out the service with reasonable care and skill.

14 Implied term about time for performance.

(1) Where, under a relevant contract for the supply of a service by a supplier acting in the course of a business, the time for the service to be carried out is not fixed by the contract, left to be fixed in a manner agreed by the contract or determined by the course of dealing between the parties, there is an implied term that the supplier will carry out the service within a reasonable time.

(2) What is a reasonable time is a question of fact.

15 Implied term about consideration.

(1) Where, under a relevant contract for the supply of a service, the consideration for the service is not determined by the contract, left to be determined in a manner agreed by the contract or determined by the course of dealing between the parties, there is an implied term that the party contracting with the supplier will pay a reasonable charge.

(2) What is a reasonable charge is a question of fact.’

Case Law

In a recent case, Marks and Spencer plc v BNP Paribas Securities Services Trust Company (Jersey) Ltd and another [2015] UKSC 72, the Supreme Court has clarified the law relating to implied terms in contracts.

The Judgment of that court reinforces a trend, evident in recent decided cases, to respect the words used by the parties to effect the deal they have made.

Terms Implied by Fact | KANGS Contractual Disputes Solicitors

An implied term of fact is one not expressly set out in the contract but which the parties must have intended to include to give efficacy to their wishes, otherwise the contract would not make sense without it.

In BP Refinery v Hastings [1997], the Privy Council provided guidance when considering whether such a term should be implied into a contract stating it must be:

  • reasonable and equitable,
  • necessary to give business efficacy to the contract,
  • so obvious that 'it goes without saying',
  • capable of clear expression
  • of a nature not contradictory to any express term of the contract.

How Can We Assist? | KANGS Dispute Resolution Solicitors

It is always important to understand the terms of any agreement you enter into for your own protection and to ensure you perform your obligations fully.

Many contractual disputes arise and result in court action or another form of dispute resolution as the result of the parties failing to understand and ensure that important contractual obligations they seek to enter when undertaking essential business contracts require careful consideration and incorporation when concluding a formal document.

Additionally, many disputes arise as the result of inadequate verbal contracts when the parties simply feel they do not require any formal agreement or there is insufficient time in which to conclude one.

The Team at KANGS offers an abundance of experience gained from supporting clients, whether individuals or corporate, in the resolution of any dispute arising from any trading breaches of concluded contracts.

Who Can I Contact for Help? | KANGS Commercial Litigation Solicitors

If we can be of assistance, our Team is available via:

Telephone: 0333 370 4333

Email: info@kangssolicitors.co.uk

We provide initial no obligation discussion at our three offices in London, Birmingham and Manchester.

Alternatively, discussions can be held virtually through live conferencing or telephone.

Tim Thompson

Tim Thompson
Partner

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Nazaqat Maqsoom

Naz Maqsoom
Associate

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