Transcript Slide 1

Implied terms
‘To some this was a fiction, to others an
ingenious tool. Either way, it allowed the
courts to get involved in the contents of
contracts without infringing the principle of
freedom of contract. Based on the theory that
the courts were merely
interpreting the presumed intention of the
parties, they could incorporate new terms
where the contract was silent.’ Appleby in
‘Contract Law’ 2001, published by Sweet and
Maxwell, at page 197.
Terms implied ‘in law’ and ‘in fact’
It is perhaps easier to see the ‘justification’ for
terms implied in ‘fact’ in the sense that such
implied terms tend to apply to just ‘one’ contract on
a ‘one off’ basis, being peculiar to the ‘facts’ of that
particular case.
It is arguably less easy to justify terms being
implied in ‘law’ as these implied terms tend to
apply to a whole ‘type’ of contracts across the
board. Their justification is often said to be for
‘policy’ reasons or for ‘fairness’.
How terms may be implied into contracts can
be considered under 3 headings:
i. Terms implied by usage or custom
ii. Terms implied by the courts
iii. Terms implied by statute
We shall discuss each of these in turn.
Terms implied by usage or
custom
A key case here is Hutton v Warren 1836
The court held that the plaintiff was allowed a
fair allowance for seeds and labour according
to the prevailing custom.
London Export Corporation Ltd v
Jubilee Coffee Roasting Co 1958
Lord Jenkins stated:
‘An alleged custom can be incorporated into a
contract only if there is nothing in the express
or necessarily implied terms of the contract to
prevent such inclusion and, further, that a
custom will only be imported into a contract
where it can be so imported consistently with
the tenor of the document as a whole.’
Terms implied by the courts
This is where the debate on implying
terms ‘in law’ and ‘in fact’ is centred.
A leading case is Liverpool City Council
v Irwin 1977.
The Moorcock 1889
For business efficacy, a term was implied into
their contract that when the tide ebbed and
the steamship bottomed out, the river bed
was such that no damage would be suffered
by the steamship.
This is a term implied in fact to the particular
facts of this case.
Reigate v Union Manufacturing Co (Ramsbottom) 1918
Shirlaw v Southern Foundries 1939
‘Prima facie that in a contract that is left to be implied and
need not be expressed is something so obvious that it
goes without saying; so that, if while the parties were
making their bargain an officious bystander were to
suggest some express provision for it in their agreement,
they would testily suppress him with a common,
“ Oh, of course”.’
This is the idea of the ‘officious bystander’ test evidenced
in the words of MacKinnon LJ.
Terms implied in law
The courts may also imply terms into
contracts not based on the particular
facts of the case, but, because they
believe the contract to fall into a certain
‘type’ of contract that for policy reasons
or fairness, a certain term should be
implied into it. These terms are thus
said to be implied ‘in law’.
Liverpool City Council v
Irwin 1977
The problem with the Liverpool case is that in
the House of Lords there seems to be a
blurring of these two types of implied terms,
terms implied in fact and terms implied in law.
This is because the terms implied were
implied as being ‘necessary’ (implied in fact)
so that the tenants could make use of the lifts
and rubbish chutes, yet the landlords only
had to take ‘reasonable’ steps (implied in law)
to look after the lifts and rubbish chutes.
Liverpool City Council v Irwin 1977
Lord Wilberforce said that a term could only be implied
where it was ‘necessary’ to do so. In the case of a tower
block of flats since it was ‘necessary’ for the tenants to
use the lifts, stairs and rubbish chutes, then the court
could imply a contractual obligation on the council with
regards to those areas. However, he then said that just
what was ‘necessary’ had to be decided in the particular
circumstances of each case and in this case it would be
‘unreasonable’ to imply a term that the council had to
keep the flats in 100% repair. Rather, the term implied
should be that the council should take ‘reasonable care
to keep the communal areas of the flats in reasonable
repair’ and they had done this.
Terms implied into contracts
by operation of statute
In the Liverpool case, the House of Lords
allowed a term to be implied into the contract
between the council and tenants by virtue of a
statute – under section 32 (1)(b)(i) of the
Housing Act 1961 – ‘to keep ...in proper working
order the installations... for the supply of
water..for...sanitary conveniences’. The tenants
succeeded on this part of the appeal because
the lavatory cisterns were badly designed and
so the toilets kept on flooding.
With regards to goods and
services, we now have:
For the sale of actual GOODS:
Sale of Goods Act 1979
(as amended by the Sale and Supply of Goods Act
1994) and
for the supply of SERVICES – the
Supply of Goods and Services Act 1982
(as amended by the Sale and Supply of Goods Act
1994)
Status of terms implied into
contracts
For terms implied by statute, most notably for our purposes
by the Sale of Goods Act 1979 and the Sale and Supply of
Goods and Services Act 1994, the statute usually states
whether the implied term is to be a condition or warranty.
The provisions relating to GOODS all imply terms that have to
be regarded by the courts as CONDITIONS.
But, the provisions relating to the supply of SERVICES do not
state that the terms implied are ‘conditions’ - they only imply
‘TERMS’
Sale of Goods Act 1979
Section 12 of the Sale of Goods Act deals with Title
The Act implies into contracts that the seller has the
right to sell the goods, that he has good title in the
goods. We are told in section 12 (5A) that the term
implied here is to be regarded as a condition.
Section 13 – deals with Sale by description
Where goods are sold by description there is an implied
term in the contract that the goods will correspond with
the description, and this is also to be regarded as a
condition.
Supply of Goods and
Services Act 1982
Part 1 of the Act
Concerns the ‘supply’ of goods – and was
necessary because:
due to the definition of a contract of sale
under the 1979 Act, many transactions where
property does change hands were not
covered by the Act.
Supply of Goods and Services Act 1982
Part II of the 1982 Act concerns contracts for ‘services’
Section 13 When 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
Section 14 When acting IN THE COURSE OF A BUSINESS if no time
is specified for completion of the service in the contract, then there is
an implied term that the supplier will carry out the work within a
reasonable time.
Section 15 When the contract makes no mention of the consideration
(price) there is an implied term that the party contracting with the
supplier will pay a reasonable charge – which is a question of fact.
Robinson v Graves 1935
The test for goods or services operates on the
basis of finding the ‘SUBSTANCE’ of the contract
and then categorising the contract as one of sale
of goods or supply of services – one or the other.
If the ‘substance’ of the contract is the production
of something to be sold, then it is a sale of goods.
If, however, the ‘substance’ of the contract is the
‘skill and labour’ involved with the production of
the article as only ancilliary, then the substance of
the contract is that of supply of services
What is ‘reasonable’ care
and skill?
Key cases:
Bolam v Friern Hospital Management
Committee 1957
Kimber v William Willett Ltd 1947
Nettleship v Weston 1971
Thake v Maurice 1986
Timing and the effect of
delays
United Scientific Holdings Ltd v Burnley
Borough Council 1978
Charnock v Liverpool Corporation 1968
Hick v Raymond and Reid 1893
Cost
If there is no mention of the amount
payable in the contract then s 15 of the
1982 Act provides for an implied term
that the consumer will pay a ‘reasonable
amount’.
Course of a business or not
It is important to note that under the
Sale of Goods Act 1979 - section 14 (quality and
fitness for purpose) ONLY applies to goods sold in
the COURSE OF A BUSINESS, and
Under the Supply of Goods and Services Act 1982
– sections 13 (care and skill) and 14 (reasonable
time ) ONLY apply to suppliers acting IN THE
COURSE OF A BUSINESS