Implied Terms EVALUATION Flashcards
Explain
Under common law terms can be implied by custom, meaning terms that are usually in a
contract are still there even if not specified such as the standard terms in British Crane hire Co. v IPH. Terms can also be implied by fact, where both parties would have intended the term to be there. There are two tests for this according to M&S v Paribas. First, the
business efficacy test, where the contract would be pointless without having the term implied (like having a safe dock in the Moorcock), or the officious bystander test. This was explained in Shirlaw v southern Foundries as the parties would reply with a common ‘of
course!’ if the term was suggested by an officious bystander. Irwin shows that if the parties would not have intended the term, they can be implied by law where the court believe that term should be in the contract and this will then apply to future contracts of the same kind (i.e. it should have been the landlords duty to maintain common areas).
Terms can also be implied by statute. B2C contracts are now covered by the more powerful Consumer Rights Act 2015 (CRA). For goods, this provides the right to satisfactory quality (S9), fitness for purpose (S10), and matching descriptions (S11). S20 allows the consumer to reject the goods and get a refund within 30 days. S23 allows the consumer to ask for a repair or replacement, and S24 allows for a price reduction if this is impossible. None of these rights can be excluded under S31
Implying terms through CRA damages freedom of contract
On the one hand, implying terms through the CRA could be unfair as it damages freedom of
contract. The CRA forces businesses to operate in certain ways regardless of their
agreement with the consumer – the consumer also cannot give up these rights even if they
wanted to, which means the parties have less control of the contract. On the other hand, not
having these implied rights could force consumers to accept lower standards of goods and services due to them having less bargaining power than the business, and therefore already have less control of the contract. Therefore, the CRA seems to create overall fairness by balancing bargaining powers and maintaining good business practice
CRA creates uncertainty over the subject matter of contracts
However, the CRA may also be unfair due to it creating uncertainty over the subject matter
of contracts. The trader is bound by implied rights even if they did not put them in the
contract; if they specifically excluded them; and even if they did not know of them at all. This could be unfair for the trader to comply with terms they did not think were in the contract. On the other hand, because the CRA grants these absolute rights to ALL B2C contracts, it can be argued that this does actually maintain certainty, as these terms will always be in the contract. Therefore both parties should know these terms apply and the CRA creates more fairness
Implying through common law is less fair than CRA
Implying through common law may be less fair than the CRA. Unlike the CRA common
inserts terms irrespective of the parties’ wishes, even in B2B cases with equal bargaining power. It is also less clear when the courts will use the common law rules, whereas the CRA always applies. However, when implying through fact, the court are actually trying to achieve the real intent of the parties - in other words doing what both parties truly wanted. Therefore it can be argued that implying by fact actually creates fairness by making sure the point of the contract is fulfilled where the parties failed to do this with their own terms initially
Implying by law is hard to defend
Implying by law is harder to defend though. This is because the courts imply by law even
when the parties would not actually want the term, which goes against freedom of contract. It is also very uncertain when a judge believes a term ‘should’ be in the contract, and so
parties may be breaching terms they had no idea would exist which is unfair. On the other
hand, the court having the flexibility to imply terms this way can allow them to create justice
where there are problems like unequal bargaining power and where it is important for certain contracts (ie. housing and employment) to work in certain ways. Therefore having such a flexible tool in both B2B and B2C contracts can lead to fairness if injustice would otherwise
be created
