Implied Terms & Statutory Control of Contract Terms

Catergories of Implied Terms

Implied by law 
• by statute 
• by common law 
• by custom / usage 
• affect similar contracts / types of contract 

Implied in fact 
• affect individual contracts

What’s an Implied Term

An unwritten provision added to a contract by law, custom, or necessity. 

When are terms implied?

To fill gaps, ensure fairness, or reflect the parties' presumed intentions.   

Implied Terms - By Law

Arise from statutes, common law principles, or established customs.   

 Apply to specific types of contracts (e.g., sale of goods, employment).   

Implied Terms - By Fact

Arise from the specific circumstances of an individual contract. 

Implied only if necessary for:   

 Business Efficacy: Ensuring the contract works as intended.   

 Reasonableness: So obvious it "goes without saying" (officious bystander test).   

Officious Bystander Test

- Determines whether a term should be implied in a contract by asking:   

• Would both parties have agreed to the term as "obvious" if an officious bystander had suggested it during contract formation? 

• If the term is so self-evident that both parties would respond with, "Of course!" it is implied.   

Key Features:   

- Focuses on the presumed intention of the parties.   

- Requires the term to be necessary for the contract to work as intended.   

Business Efficiancy Test

Determines whether a term should be implied in a contract by asking:   

•  Is the term necessary to make the contract work effectively and as the parties intended? 

• If the contract would be unworkable or nonsensical without the term, it is implied.   

 Key Features:   

- Focuses on practical necessity, not just convenience.   

- Ensures the contract achieves its intended purpose.   

Implied Terms by Law - Statutes

- Sale of Goods Act 1979: Implies terms about title, quality, and description for goods in business-to-business contracts.   

 - Consumer Rights Act 2015: Implies terms about goods' conformity for business-to-consumer contracts.   

 - Working Time Regulations 1998 and Commercial Agents Regulations 1993.   

Implied Terms by Law - Common Law

- Duty of care in professional services (e.g., solicitors, accountants).   

 - Duty of mutual trust in employment contracts.   

Implied Terms by Law - Custom or Usage

Terms implied by long-standing, widely recognized practices in a specific trade or locality.   

Statutory Control of Contract Terms

- Purpose: To ensure fairness and limit exploitative terms.   

- Scope: Applies differently to B2C and B2B contracts.   

Business-to-Business (B2B) Contracts - Key Provisions of the Consumer Rights Act 2015: 

Unfair terms or notices are not binding on the consumer.   

   - Courts must assess the fairness of terms even if not raised by the parties.   

   - Three-part fairness test:   

     1. Contrary to good faith.   

     2. Causes significant imbalance in rights.   

     3. Detrimental to the consumer.   

Business to Business Contracts (B2B) - Terms Likely to be Unfair

  - Limit trader liability disproportionately.   

   - Allow unilateral decisions on price or performance.   

   - Restrict consumers' litigation rights unfairly.   

Business to Business Contract (B2B) - Enforcement

   - Ambiguous terms interpreted in favor of the consumer (*s69*).   

   - Exclusion of liability for death or personal injury is prohibited (*s65*).   

Business-to-Business (B2B) Contracts- Key Provisions of the Unfair Contract Terms Act 1977: 

   - Liability for death or personal injury cannot be excluded.   

   - Other liability exclusions must meet the "fair and reasonable" test.   

   - Standard-form contracts are heavily scrutinized under s17.   

Business to Business Contracts (B2B) - Fair and reasonable argeements

  Courts consider:   

   - Bargaining power balance.   

   - Alternative sources of advice or expertise.   

   - Practicality of exclusion clauses.   

   - Who bears the risk (e.g., insurance considerations).