Introduction
This essay explores the circumstances under which courts may imply terms into contracts under common law within the context of English contract law. Implied terms are provisions not expressly agreed by the parties but incorporated by the courts to reflect the presumed intentions of the parties or to ensure fairness and efficacy in contractual dealings. The purpose of this analysis is to outline the key principles and tests applied by courts when implying terms, focusing on the tests of business efficacy and officious bystander, as well as the role of custom and statutory implications. Through a critical examination of case law and academic perspectives, this essay will evaluate the circumstances and limitations of such judicial intervention.
Business Efficacy Test
One primary circumstance under which courts imply terms is to give business efficacy to a contract, ensuring it operates as intended by the parties. This principle was articulated in The Moorcock (1889), where the court held that a term could be implied if it is necessary to make the contract workable (Bowen LJ, 1889, cited in Poole, 2016). For instance, in that case, a wharf owner was deemed to have impliedly warranted the safety of a vessel’s berth to prevent the contract from being rendered ineffective. However, courts are cautious not to rewrite contracts; the implied term must be essential, not merely desirable. This test reflects a practical approach but is limited by judicial reluctance to overstep into the domain of express agreements, as seen in later cases where terms were not implied if the contract could function without them (Poole, 2016).
Officious Bystander Test
Another significant criterion is the officious bystander test, established in Shirlaw v Southern Foundries (1926) Ltd (1939). This test posits that a term may be implied if it is so obvious that, if asked, both parties would agree to its inclusion without hesitation (MacKinnon LJ, 1939, cited in McKendrick, 2021). For example, a term ensuring timely performance might be implied in a commercial contract if it is fundamental to the agreement’s purpose. Nevertheless, this test is subjective to some extent, as it relies on the court’s interpretation of what is “obvious.” Critics argue this can lead to inconsistency, as judicial assumptions may not always align with the parties’ actual intentions (McKendrick, 2021). Thus, while useful, the test is applied stringently to avoid imposing external views on private agreements.
Custom and Practice
Courts may also imply terms based on custom or trade practice, provided the usage is notorious, certain, and reasonable. This was demonstrated in Hutton v Warren (1836), where a term regarding agricultural tenancy was implied based on local custom (cited in Poole, 2016). Such terms are implied to reflect the context in which the contract was made, ensuring alignment with industry norms. However, this circumstance is limited; the custom must be widely accepted and not contradicted by express terms. Furthermore, in an increasingly globalised economy, establishing consistent customs can be challenging, reducing the applicability of this ground in modern contexts.
Statutory Implied Terms
Lastly, courts may imply terms mandated by statute, although these are not strictly common law implications. For instance, under the Sale of Goods Act 1979, terms regarding satisfactory quality and fitness for purpose are implied into contracts for the sale of goods (McKendrick, 2021). While this is a legislative intervention, it often complements common law principles by providing a framework where judicial implication might otherwise be necessary. This highlights the interplay between statutory and common law mechanisms in achieving contractual fairness.
Conclusion
In conclusion, courts imply terms under common law primarily to ensure business efficacy, uphold obvious intentions via the officious bystander test, reflect custom and practice, or align with statutory provisions. These circumstances are guided by a balance between respecting party autonomy and ensuring practical and fair outcomes, as evidenced in landmark cases like The Moorcock and Shirlaw v Southern Foundries. However, judicial caution remains evident, as over-implication risks undermining express agreements. The implications of this analysis are significant for contract drafting, as parties must anticipate areas where courts might intervene, encouraging clarity in explicit terms to minimise judicial interpretation. Arguably, while these principles provide a necessary safety net, their application remains subject to judicial discretion, occasionally leading to unpredictability in outcomes.
References
- McKendrick, E. (2021) Contract Law: Text, Cases, and Materials. 10th ed. Oxford University Press.
- Poole, J. (2016) Textbook on Contract Law. 13th ed. Oxford University Press.
