Terms will be implied into contract for one of two reasons:
- Because a court in a later dispute is trying to give effect to a presumed intention of the parties, even though these intentions have not been expressed (these are terms implied by fact)
- Because the law demands that certain obligations are to be included in a contract irresponsible of whether the parties have agreed on them or would naturally include them (these are terms implied bylaw- usually this will be as the result of some statutory provision aimed at redressing an imbalance in bargaining streght or seeking to protect a particular group- but it can e by operation of the common law).
Terms implied by fact
Where terms are implied by fact, this is usually as a result of decisions in individual court cases. The courts have implied terms by fact in a variety of different circumstances.
Terms implied by law- by statute
In the 19th century the law of contract was most commonly governed. The law was very much concerned with the process of contracting and little attention was paid to the fact that in many circumstances one party to the contract was in a significantly interior bargaining position to the party. Early statutes such as the Sale of Goods Act 1893 did attempt to redress this imbalance. In late half of the 20th century there has been much more awareness of the needs of consumers, employees and others in contractual relationships. The old maximum has been found wanting and unacceptable and Parliament, through Acts, has often given greater protection to the party with the weaker bargaining strength in certain types of contracts by the process of inserting or implying terms into the contracts irrespective of the express intentions of the parties.
The importance of such terms is that they provide a statutory protection that can be constantly relied upon because they will usually apply regardless of what is said in the contract.
The Sale of Goods Act 1979
The Act contains a number of these terms which provide a very clear example of the process and its benefits.
Exclusion clauses
Clause in a contract that seeks to either limit or exclude liability for breaches of the contract is itself a term of the contract. It is therefore subject to all of the normal rules regarding terms, particular those concerning incorporation of the term.
Such terms can be particularly harsh on the party subject to them and they often highlight the inequality of bargaining that can exist between different parties notably provides of goods and services and consumers. Even where statute intervened to create protections for the consumer, as in the Sale of Goods Act 1893, the sellers’ superior position was generally preserved. Although s55 of the 1893 Act allowed sellers to exclude liability for breaches of the implied conditions in the Act .
As a result, judges gradually developed rules to prevent sellers having an unfettered discretion to avoid liability for their contractual breaches. More recently, a general trend towards consumer protection has seen the introduction of more effective statutory controls and the UK has also had to implement controls created in European law.
Judicial controls, though, are still effective in limitations the use of exclusion clauses.
