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Contract | Formation

Terms: Implied by Courts

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  • contracts have express terms & sometimes implied terms are read into the agreement, by courts or through statute

Local custom or trade usage

  • courts may imply terms on the basis of local custom or trade usage


    • plaintiff's (P) farm lease expired & he claimed an allowance for seed & labour but there was no provision in lease


    • if contract is silent on a point may a term be implied?


    • term was implied due to local custom & contract did not expressly state allowance would not be given
  • if contract expressly contradicts local custom or trade usage, courts understand parties considered usual practice & decided not to follow it

Previous dealings between the parties

  • courts may imply terms on the basis of previous dealings between the parties


    • defendant (D) delivered barrels of juice to P for storage, each time D given receipt (including an exemption clause)
    • D discovered barrels empty on collection , refused to pay storage charges & P sued, D counter-claimed for negligence & P relied on exemption clause as a defence


    • was the exemption clause and implied term of the contract?


    • clause was implied term despite being contained post contractual document, incorporated by the parties' previous consistent course of dealing

Presumed intention of the parties

  • courts may imply terms to reflect the presumed intention of the parties
    • Lord Hoffman: .. The court has no power to improve upon the instrument which it is called upon to construe... It cannot introduce terms to make it fairer or more reasonable. It is concerned only to discover what the instrument means. However, that meaning is not necessarily or always what the authors or parties to the document would have intended. It is the meaning which the instrument would convey to a reasonable person having all the background knowledge which would reasonably be available to the audience to whom the instrument is addressed...
  • courts rarely take this approach because interests & intentions of parties in dispute tend to conflict

Type of contract

  • courts may imply terms which are standard provisions found in a certain type of contract


    • D refused to pay rent because common areas of flats were in disrepair & P sought to evict D for rent arrears
    • D counter claimed for breach of obligation to repair, but tenancy agreement only covered obligations of tenant not the landlor


    • was there an implied term that P had obligation to repair common areas of the flats?


    • there was an implied term: andlord should take reasonable care to keep common areas in reasonable repair
    • necessary for common areas to be maintained & tenants not expressly obliged to do so, therefore implied landlord's obligation
    • P not held in breach of implied term
    • Lord Denning (dissenting in Court of Appeal) argued term could be implied if if reasonable to do so
    • Lord Wilberforce (House of Lords) found test of necessity should be used: what was necessary to make this particular type of contract work
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