Contracts should ideally contain all of the terms the parties wish to include to regulate their contractual relationship.
But for various reasons terms are often not included, for example because they are so obvious they go without saying.
These terms are called implied terms and they are just as enforceable as the express terms.
However there is usually room for argument about whether a term should be implied in a contract, and it is generally undesirable to refer such arguments to the Courts for decision.
So how do you work out whether a term should be implied in a contract?
There are various categories of implied term, including the following:
- An implied term which generally applies to every contract, that each party will do all that is reasonably necessary to secure performance of the contract, including enabling the other party to have the benefit of the contract.
- A term implied in fact in a particular contract, based on the presumed intention of the parties. This kind of term must be reasonable and equitable, be necessary to give business efficacy to the contract, be so ‘obvious it goes without saying’, be capable of clear expression, and not contradict any express term of the contract.
- A term implied as a matter of law into a particular class of contract, by statute and/or the common law. For example terms implied into leases of land and goods, into contracts of employment, insurance, guarantees, partnership, joint venture and agency.
- A term implied on the basis of an established custom or professional practice in the industry in which the parties are engaged, or because of some past course of dealing between the parties.
- A term deduced by implication or interpretation from the express terms of the contract.
Professional expertise is required to determine whether a term should be implied in a contract.
Please contact me if you would like assistance in that regard.
For an article on how to interpret a contract click here.
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