Terms - implied in fact

Terms Implied in Fact

When a court implies a term into the contract to give effect to the presumed aims of the parties, based on their conduct and the context of their agreement.

Business Efficacy Test

A term is implied if, without it, the arrangement would be so unbusinesslike that sensible people could not be supposed to have entered into it - ensures contract functions in a practical and commercial manner.

The Moorcock

The defendants owned a place to moor boats, and the claimants owned the {___} . At low tide, the ship was damaged. Claimants sued for breach of contract. Defendants argued no obligation existed.

Officious Bystander Test

A term is implied if it is so obvious that if an officious bystander suggested it, the parties would respond, "Oh, of course."

Southern Foundries v Shirlaw

A term can be implied if it is something so obvious that it goes without saying. If an officious bystander suggested the term, the parties would testily respond, "Oh, of course.

Wilson v Best Travel Ltd

Claimant was injured by falling through glass doors in Greece. The doors met Greek standards but not UK standards the travel agency were not liable as their precautions were reasonable.

Griggs Group v Evans

Evans argued he retained IP rights for a logo he created. Court applied the officious bystander test . An officious bystander would agree that rights belonged to the company, as retaining IP rights would contradict the company's intention to hire Evans for the logo.

BP Refinery v Shire of Hastings

5 requirements for implying a term:

1. Must be reasonable and equitable.

2. Necessary for business efficacy—contract must be unworkable without it.

3. So obvious it goes without saying.

4. Capable of clear expression.

5. Must not contradict any express term of the contract.

AG of Belize v Belize Telecom Ltd

Courts imply terms if necessary to reflect the parties' intentions. No fixed tests—dependent on judicial discretion.

Lord Hoffman's View: Only one approach is to construe the contract and imply terms as necessary for its operation

Marks and Spencer v BNP Paribas Securities Services

Tenant terminated lease via break clause and sought to recover rent paid for post-break period.

Held: Court ruled in favor of landlords. Explicit words needed to imply repayment term. Emphasized clarity and necessity of implied terms.

Lord Neuberger’s Judgement

Fairness alone isn't enough for implying a term. Both business efficacy and obviousness tests preferred for clarity. Emphasized returning to original tests

Importance of Implied Terms

Ensures contracts are practical and reflect true intentions of parties. Maintains commercial coherence and effective functioning of agreements.

Applications: Used in diverse cases to bridge gaps and reflect genuine business practice and expectations