Implied Contractual Terms

February 02, 2017

Dispute Resolution

Implied Contractual Terms

An argument that is often raised in a dispute over a contract is that the contractual documentation does not fully represent the agreement between the parties.  The party who claims to be affected will then argue for the existence of an implied term.  If the claimant succeeds, the consequences may be substantial.

Judges are slow to find that implied terms exist; not unnaturally the law presumes that the agreement recorded as having been made is a full statement of terms.  However, when presented with a claim for an implied term a court will take an objective approach. 

It will not seek to insert into an agreement a provision which would have been sensible or business-like or even one which most other people would have expressly inserted.  Instead the court will consider what a reasonable person (a third party) would have understood the parties’ intentions to be, given the background knowledge reasonably available to the parties at the time they entered the contract.  So it is really more of an exercise of correcting the written contract to reflect those intentions rather than adding to the agreement.

 

If the implied term being claimed contradicts an express term (that is one set out in the contract) then there is no chance of the claim succeeding.

The trouble for the claimant is that, where a contract is apparently carefully drafted but is silent on a particular issue, it is difficult to infer with confidence what the parties intended. Although not determinative of the issue, the fact that the agreement works without the implied term is a significant impediment to implying a term that affects the substance of the agreement.

The moral is that a failure to ensure that a contract covers all the angles of a particular issue is more likely than not to result in a claim for an implied term being rejected.

If you need help or advice on any matter relating to contracts (including employment) please call Julian on 01865 244661.

posted by Julian Freeland | February 02 2017