Kara Sears
In the UK, express and implied terms are the building blocks of every contract, shaping the legal rights and responsibilities of the parties involved. While express terms are those that are specifically agreed upon and stated by the parties, implied terms are provisions that are incorporated into the contract without being explicitly stated. These terms fill in gaps in the express agreement and can arise from legislation, common law, or courts. However, a key principle in contract law is that express terms generally take precedence over implied terms. Courts will typically not imply contradictory terms if the parties have explicitly agreed to something. Nevertheless, certain implied terms, particularly those implied by statute in consumer contracts, can override conflicting express terms. This topic explores the interplay between express and implied terms in UK contract law, addressing scenarios where implied terms might contradict express terms and the legal principles that govern their interpretation and enforcement.
| Characteristics | Values |
|---|---|
| Purpose of implied terms | To supplement a contractual agreement in the interest of making the deal effective for the purpose of business, to achieve fairness between the parties or to relieve hardship |
| Implied terms | Provisions that haven't been explicitly stated but are nevertheless incorporated into the contract |
| Implied terms fill gaps in the express agreement | Yes |
| Implied terms can come from | Legislation, common law, or courts |
| Express terms take precedence over implied terms | Yes |
| Implied terms can override express terms | In certain cases, particularly those implied by statute in consumer contracts |
| Implied terms provide context for interpreting ambiguous express terms | Yes |
| Implied terms are inserted when | They are reasonable, equitable, necessary for the contract’s effectiveness, obvious, and capable of clear expression |
| Implied terms contradicting express terms | Courts will not insert implied terms that contradict express terms |
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What You'll Learn
- Implied terms are provisions that fill gaps in express agreements
- Implied terms are derived from legislation, common law, or courts
- Courts interpret contracts using express terms only if no term is implied
- Courts will not imply terms that contradict express terms
- Implied terms can address behaviour that frustrates performance of the contract
Implied terms are provisions that fill gaps in express agreements
In contract law, express terms and implied terms work together to define the full scope of a party's rights and responsibilities. Express terms are provisions that are explicitly agreed upon and stated by the parties, either verbally or in writing. They are deliberately included in the contract and represent the clear intentions of the contracting parties. On the other hand, implied terms are provisions that fill gaps in express agreements. They are not explicitly stated but are incorporated into the contract. These terms are necessary because all contracts are necessarily incomplete due to the uncertainty inherent in any agreement.
Implied terms can arise from various sources, such as legislation, common law, or customary business practices. For example, the Sale of Goods Act 1979 implies terms that goods must be of satisfactory quality and fit for purpose. Similarly, the Landlord and Tenant Act 1985 implies terms regarding landlords' repair obligations. Employment contracts also contain implied terms, such as mutual trust and confidence. These terms are so standard within their respective industries that they are assumed to apply unless expressly excluded.
Courts play a crucial role in interpreting and implying terms into contracts. They may imply terms to give effect to the overall contract when the parties involved did not consider a particular issue or omitted to include a term. Courts can also imply terms through legislation or other routes, such as custom and usage in a particular trade or industry. For instance, in the case of Kum v Wah Tat Bank Ltd., Lord Devlin highlighted the importance of proof that a custom is generally accepted and known within the trade or market concerned for it to be considered a term.
While express terms generally take precedence over implied terms, certain implied terms, particularly those implied by statute in consumer contracts, cannot be excluded and will override conflicting express terms. This is because implied terms are often necessary to supplement a contractual agreement to achieve fairness, relieve hardship, or make the deal effective for business purposes. As such, implied terms can provide context and help interpret ambiguous express terms by referring to industry standards or business common sense.
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Implied terms are derived from legislation, common law, or courts
Implied terms are those provisions that are incorporated into a contract but have not been explicitly stated. They fill in the gaps in the express agreement and are derived from various sources, including legislation, common law, or courts.
Legislation
Implied terms can be derived from legislation, which automatically inserts certain terms into specific types of contracts. For instance, the Sale of Goods Act 1979 implies that goods must be of satisfactory quality and fit for purpose. Similarly, the Landlord and Tenant Act 1985 includes implied terms regarding landlords' repair obligations. These terms are standard within their respective industries and are assumed to apply unless expressly excluded.
Common Law
Common law also plays a role in implying terms into contracts. For example, employment contracts are known to contain implied terms regarding mutual trust and confidence. These terms are derived from the implicit meaning of the agreements and are considered fundamental to the relationship between employers and employees.
Courts
Courts may also imply additional terms into a contract to ensure it satisfies legal requirements and gives effect to the parties' intentions. These implied terms can be excluded by express terms or if they are inconsistent with the nature of the contract. For instance, in the case of Kum v Wah Tat Bank Ltd., the court determined that customs could be overridden by express terms if they were inconsistent with the contract's nature.
While implied terms are essential, express terms generally take precedence. Courts will not typically imply contradictory terms if the parties have explicitly agreed to something else. However, certain implied terms, particularly those implied by statute in consumer contracts, cannot be excluded and will override conflicting express terms.
In summary, implied terms derived from legislation, common law, or courts play a crucial role in shaping the rights and responsibilities of contracting parties. They fill in the gaps left by express terms and ensure that contracts are fair, effective, and legally compliant.
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Courts interpret contracts using express terms only if no term is implied
Contracts are the foundation of commercial and business relationships, but not everything that is agreed upon is always explicitly written down. Contracts are generally classified into two types: express terms and implied terms. These terms are the building blocks of every contract, shaping legal rights, responsibilities, and the outcome in the event of a breach.
Express terms are provisions that are explicitly agreed upon and stated by the parties, either verbally or in writing. They are deliberately included in the contract and represent the clear intentions of the contracting parties. Express terms are usually given priority over implied terms. If the parties have explicitly agreed on something, courts will typically not imply contradictory terms. However, certain implied terms, particularly those implied by statute in consumer contracts, cannot be excluded and will override conflicting express terms.
Implied terms, on the other hand, are provisions that are not explicitly stated but are nevertheless incorporated into the contract. They fill in the gaps left by express terms and can arise from various sources, such as legislation, common law, or industry standards. Implied terms are often necessary to ensure the contract makes sense and complies with legal requirements. For instance, the Consumer Rights Act 2015 implies that goods purchased must be of satisfactory quality and fit for purpose.
In summary, while express terms generally take precedence, implied terms play a crucial role in ensuring the completeness and legality of contracts. Courts interpret contracts using express terms only when no term is implied, and they may add implied terms to address any gaps or omissions in the express provisions.
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Courts will not imply terms that contradict express terms
In English law, express terms generally take precedence over implied terms. If the parties have explicitly agreed to something, courts will not usually imply contradictory terms. This is because courts have no power to alter what contracts mean. If an implied term changes the fundamental nature of the agreement, it would change what has been agreed, and this will not be allowed.
Courts have developed a distinction between terms implied "in fact" and those implied "in law". Terms implied "in fact" arise when they are strictly necessary to give effect to the reasonable expectations of the parties. Terms implied "in law" are confined to particular categories of contracts, such as employment contracts or contracts between landlords and tenants.
When a contract is silent on a subject, courts may imply a term to ensure the contract makes sense and satisfies legal requirements. However, the implied term must not contradict the express terms of the contract. It must be reasonable, equitable, necessary for the contract's effectiveness, obvious, and capable of clear expression.
In two recent cases, English courts were asked to consider contracts with specific triggers for a payment of a success fee. In each case, the specific trigger had not been achieved, but the affected party still sought payment, arguing that they had done significant work and deserved to be paid. The courts refused to insert the implied term that payment should be honoured, reiterating the long-standing principles regarding the insertion of implied terms.
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Implied terms can address behaviour that frustrates performance of the contract
Implied terms are provisions that are incorporated into a contract but are not explicitly stated. They fill in the gaps in the express agreement and can come from various sources, such as legislation, common law, or industry standards. Implied terms are often necessary to give full effect to the intention of the parties and ensure the contract is effective for its purpose.
In the context of behaviour that frustrates the performance of a contract, implied terms can play a crucial role. For example, consider a contract that imposes obligations primarily on one party, making it one-sided. Implied terms can address this imbalance by imposing corresponding obligations on the other party, ensuring they do what is necessary for the completion of the contract. This prevents behaviour that might hinder or prevent the fulfilment of the contract.
Additionally, implied terms can address circumstances where one party actively works against the fulfilment of the contract. For instance, a negative obligation implies that each party should not actively prevent the fulfilment of the contract. If a party's actions or inactions lead to a breakdown in the contractual relationship, implied terms can hold them accountable.
The doctrine of frustration of purpose further illustrates how implied terms can address behaviour that frustrates performance. This doctrine applies when circumstances render the value of one party's performance worthless to the other, even if contractual duties could still be carried out. While not a rule of objective impossibility, it recognises that the core purpose of the contract, understood by both parties, has been severely frustrated.
In summary, implied terms can address behaviour that frustrates the performance of a contract by rebalancing one-sided agreements, imposing corresponding obligations, and holding parties accountable for their actions or inactions that hinder the fulfilment of the contract. These terms ensure that parties act in good faith and deal fairly with each other, as per the implied covenant of good faith.
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Frequently asked questions
Implied terms are provisions that are incorporated into a contract but have not been explicitly stated. They fill gaps in the express agreement and can come from various sources, such as legislation, common law, or the courts.
No, implied terms cannot contradict express terms. Courts will not imply contradictory terms if the parties have explicitly agreed to something in the contract. However, certain implied terms, particularly those implied by statute in consumer contracts, can override conflicting express terms.
Terms implied "in fact" arise when they are strictly necessary to fulfil the reasonable expectations of the parties. They are typically confined to specific categories of contracts, such as employment contracts or landlord-tenant agreements. Terms implied "in law" are default rules that apply when the contracting parties' chosen terms are silent or when mandatory rules override the chosen terms.
Courts consider the intentions of reasonable people in the position of the parties, the reasonable expectations of the parties, and the necessity of the implied term. The implied term must also be obvious, equitable, and capable of clear expression.
Examples of implied terms include the National Minimum Wage Act 1998, which sets a minimum wage for workers, and the Consumer Rights Act 2015, which implies that goods purchased will be of satisfactory quality and fit for purpose. Implied terms can also arise from custom and usage in a particular trade or industry or previous dealings between the parties.
