LAW OF CONTRACT. LAW 103. THE CONTENT OF THE CONTRACT.

Authors Avatar
LAW OF CONTRACT. LAW 103.

THE CONTENT OF THE CONTRACT.

. CONTRACTUAL TERMS.

The terms of a contract identify the rights and obligations of each party under that contract. A contract is merely a collection of terms - duties and rights and penalties, some of which may be in writing and some of which may be oral. Terms create contractual obligations for breach of which an action lies.

Terms may be either express or implied.

Express terms.

Express terms are those which are specifically agreed by the parties.

Implied terms.

Implied terms are those which form part of the contract but they have not been specifically agreed between the parties during the negotiations for that contract. Terms may be implied into the contract in a number of ways;-

Terms implied through custom and practice.

Perhaps a most obvious example here would be the fact that contracts in the baking industry that make reference to the term 'dozen' may actually mean thirteen rather than twelve as that is a custom within that industry.

"It has long been settled that, in commercial transactions, extrinsic evidence of custom and usage is admissible to annex incidents to written contract, in matters with respect to which they are silent... and this has been done upon the principle of presumption that, in such transactions, the parties did not mean to express in writing the whole of the contract by which they intended to be bound, but a contract with reference to those known usages." (Baron Parke - Hutton v Warren (1836) 1 M&W 466)

British Crane Hire Corporation Ltd v Ipswich Plant Hire Ltd (1975) 1 ALL ER 1059. Both parties were engaged in the business of hiring out heavy earth moving equipment. A contract was agreed by telephone for the hire of a crane. A written document was sent afterwards the terms of which were similar to those used by all firms in the plant-hiring business including the hirer themselves. One clause stated that the hirer was liable to indemnify the owner against all expenses in connection with the use of the crane. The crane sank in marshy ground with neither party to blame. The hirers claimed that the clause was inapplicable because it had been communicated after the contract had been made and thus was not incorporated into the contract.

(b) Terms implied by statute.

Perhaps the most common example of terms being implied by statute is provided by the Sale of Goods Act 1979. The provisions contained within s.12-15 relating to title, sale by description, satisfactory quality, fitness for purpose and sale by sample are implied into every contract for the sale of goods where the seller sells in the course of business.

(c) Terms implied in fact.

Terms may be implied because the very nature of the contract requires it or because the application of an objective test makes it apparent that the parties must have intended it. It may be that its omission was a simple mistake or that both parties thought it so obvious that it did not need to be stated. What is important is to ascertain the intention of the parties and the courts have developed two overlapping tests - the officious bystander test and the business efficacy test.

Shirlaw v Southern Foundries [1939] 2 KB 206.

"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 so that if while the parties were making their bargain an officious bystander were to suggest some express provision for it in the agreement, they would testily suppress him with a common 'Oh of course!'" (per Mackinnon LJ)

The Moorcock (1889) 14 PD 64.

The defendants contracted to allow the plaintiff to discharge his ship at their jetty. Both parties knew that the vessel would ground at low water. When the tide ebbed the ship settled on a ridge and was damaged. "In business transactions such as this what the law desires is to give such business efficacy to the transaction as must have been intended by both parties. What did each party know? Both knew that the jetty could only be used by the ship lying on the ground. The business of the jetty could not be carried on unless the ground was supposed to be safe. The master of the ship cold know nothing whereas the defendant might, by exercising reasonable care, know everything. The defendant was on the spot at high and low tide. The question is how much of the safety of the berth is it necessary to assume in order to get the minimum of efficacy to the transaction" Bowen LJ.

One must be careful, however, not to diminish the principle of the freedom of contract. Terms will be implied where it is necessary - not merely where it is reasonable.

"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." (per Lord Pearson Trollope and Colls Ltd v North West Regional Hospital Board [1973] 1 WLR 601)

(d) Terms implied in law.
Join now!


These are terms which the law dictates are present in certain types of contract.

"In deciding whether to imply a term in law, the courts are guided by general policy considerations affecting the type of contract in question; and to this extent considerations of reasonableness and fairness may enter into the implication of such terms." (Treitel)

Liverpool City Council v Irwin [1977] AC 239.

The defendant was the tenant of a ninth floor flat in a block owned by the claimant. His contract contained no statement of obligations of the landlord (the Council). Because of ...

This is a preview of the whole essay