It may be that a term has been omitted by mistake, when both parties clearly intended it to apply, or that statute or custom declares that a term must be incorporated. In such circumstances the courts can imply a term into a contract. These circumstances will be considered in turn.
Custom
The common law developed largely by custom, and in the past this played an important part in contract law. It is now less important as statute and case law have defined the boundaries of the law more clearly. Custom still arises, however, in commercial contracts, and we have already seen how a
‘course of dealing’ can lead to a term being incorporated into an oral contract. In a similar way customary usage within a trade may lead to a term being implied into a written contract. Here it is not necessary to show previous transactions between the parties.
Statute
Where a statute declares that a term shall be included in a particular type of contract, then it will be implied whether the parties intend it or not.
Examples are found in such statutes as the Sale of Goods Act 1979 (as amended), Unfair Contract Terms Act 1977, etc. These are in many cases a codification of custom or common law, an example of this being that where goods are sold by sample, this should correspond with the bulk of the goods.
See Chapter 16 for further details.
Terms implied by the courts
The courts also intervene to decide when statutory terms should be implied in uncertain circumstances, and will themselves imply terms if necessary.
See, for example, the case below regarding the general implication that goods are fit for the purpose for which they are supplied.
Terms will be implied in various circumstances. One common example is that in a lease of a furnished house, it is understood that the accommodation will be reasonably fit for habitation at the beginning of the lease period.
The same principle could apply to the hire of a boat which was claimed to be ready for use by the customer, but which did not contain a fire extinguisher; or to a car hired ready for use, but which did not contain a spare wheel.
The readiness to imply terms has been refined somewhat through cases, and there does seem to be a much harsher approach, evident in Liverpool City Council v Irwin (see p. 105).
Business efficacy and the intentions of the parties
It should be remembered that the general rule is that parties are presumed to have expressed their intentions fully in a written contract. However, it may be that parties who have formed a written contract have forgotten to include a term, or have failed to allow for a situation which later arises.
Generally the court will only intervene in contracts where it is absolutely necessary, following through the idea of freedom to contract. However, the aim of the courts generally is to support contracts, or bargains, where possible, rather than destroy them on technicalities, such as where there is obviously a missing term, so the following principles have been established. The courts will imply a term into a contract:
• to give effect to the clear and obvious intentions of the parties, or
• to give business efficacy to the contract.
Samuels v Davis (1943)
A set of false teeth did not fit well and could not be used. It was claimed that they were not fit for the purpose for which they were sold under the Sale of Goods Act 1979, but a defence was raised that they were not ‘goods’ to be sold, since the fitting of the teeth was a service.
It was held that rights established under the Sale of Goods Act 1979 should be applied to this sale by analogy. The teeth were not strictly goods, but there was an item to hand over at the end of the transaction, and the customer was entitled the expect that it would be fit to use.
The following case is the general authority for the principle that a term may be implied if it is clear that the parties must have intended to include it.
The decision in this case, and the principle outlined, was clearly intended to prevent injustice and give effect to an otherwise workable contract (see also the section in Chapter12 [Mistake] on Rectification). It has been cited many times since as an authority, but it should be used with caution. Clear guidelines are needed on the circumstances when a term may be implied to avoid uncertainty. It is certainly not true that any term which is afterwards thought to be a reasonable one will be implied. A term will only be implied where it is essential to make the contract function, reflecting what the parties must have originally intended. McKinnon J explained this, in words that have come to be known as the officious bystander test, in the following case.
The Moorcock (1889)
The defendants owned a wharf and jetty, and contracted with the plaintiffs to moor and unload the plaintiffs’ boat, The Moorcock, at the jetty. The water was too shallow at the jetty, so the boat ran aground and was damaged. It was held that in a business contract like this one, where a party invites another to moor at his jetty, there must be a term implied that it is suitable for that purpose, so the defendants were held liable for the damage.
Shirlaw v Southern Foundries (1939)
Prima facie, that which in any contract is left to be implied and need not be expressed is something so obvious that it goes without saying. Thus 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, ‘Yes, of course!’
A B
Don’t you want to include this?
An officious bystander
contract
Yes, of course
Figure 6.2
The following case applied the ‘officious bystander’ test to an agreement between trade unions.
It is clear from the above case, then, that a term will only be included if both parties would have wanted it. The court will not imply a term involving facts known to one party but not another (as with the Bridlington agreement, above), even if it is a good idea. The principle was applied by Lord Pearson more recently in the next case.
Cheshire and Fifoot claim that The Moorcock is still alive. It certainly is, and is a useful measure of whether a term may be implied. It was suggested by Lord Denning in Liverpool City Council v Irwin (1976) that a term concerning the maintenance of services to a block of flats should be implied where it was reasonable. This was generally rejected, and it was said that a term should only be implied where the nature of the contract implicitly required it. The cases which follow it help to refine the principles and to ensure that terms are not implied which would not have been included by Spring v National Amalgamated Stevedores and Dockers Society (1956) An agreement had been made between unions for the transfer of members from one union to another, known as the Bridlington agreement. The defendant union admitted Mr Spring without including this in their contract. When it was later suggested that it was implied, the officious bystander test was used. If Mr Spring had been asked whether he had intended this agreement to be included in his contract, he would not have known about it, so the answer would have been ‘no’.
Trollope and Colls Ltd v North West Regional Hospital Board (1973) An unexpressed term can be implied if and only if the court finds that the parties must have intended that term to form part of their contract. It is not enough for the court to find that such a term would have been adopted by the parties as reasonable men if it had been suggested to them; it must have been a term that went without saying, a term necessary to give business efficacy to the contract, a term which although tacit, formed part of the contract which the parties made for themselves.
Wilson v Best Travel (1993)
In this case the court used a similar analysis to that in Trollope and Colls.
A customer claimed that, applying the officious bystander test, a holiday company would have intended to include a term that a hotel would be reasonably safe. The courts did not agree as the standard of the hotel was too remote to be within the knowledge of the operator.
parties, had they considered them. It is important to realise that the test of this is a subjective one. It is not a matter of what a reasonable man may have included, but what the parties themselves would have agreed. The use of judicial power in this way must reflect the real intention of the parties.