EVAL: implied terms

ATTORNEY GENERAL OF BELIZE V BELIZE TELECOM the court stated that whether a term is implied hinges on interpretation of the contract as a whole. The term may have been deliberately omitted. Significant case emphasised that implying terms is not about improving contracts but discovering their objective meaning.

KOOKMIN BANK V RAINY SKY

  • concerned the interpretation of contracts

  • contract was written which contained clear terms but nothing on paying out if a company become insolvent

  • Lord Clarke: the object is to apply commercial common sense and to understand rather than override the language of the contract

ARNOLD V BRITTON

  • chalets were let for 99 years from 1974 charge of £90 per year- in a clause

  • the lessor would maintain paths, fences, park, lawns and removing rubbish

  • repair costs did not go up by 10% a year yet the service charge would increase by 10% every year

  • tenants refused to pay and said it was unfair

  • UKSC upheld the parties original intentions even though deterimental to the tenants

  • natural meaning of the clause was clear

  • interpreted the clause at the time it was made

  • in this case, Lord Neuberger said to look at these factors : 1. the natural and ordinary meaning of the clause 2. any other relevant provisions of the contract 3. the overall purpose of the clause and the contract 4. the facts and circumstances known or assumed by the parties at the time that the document was executed; and 5. commercial common sense; but 6. disregarding subjective evidence of any party’s intentions. Evaluation point: for years commercial common sense if interpreted according to parties intentions

TERMS IMPLIED IN LAW

LIVERPOOL CITY COUNCIL V IRWIN

  • Tenants lived in a tower block. Council wee landlords and asked tenants to pay the rent. Tenants said “no”, tower block kept in bad state- not repaired. An implied terms for the council to have an obligation to repair the common parts of the block of flats.

  • CoA (Denning) agreed with tenants saying it was reasonable to make it fairer but HoL didn’t- no absolute obligation on council. The OB is “the test” to apply- reasonableness developed more since this case


WELLS V DEVANI

  • Edward Wells- property developer built a block of flats- Hackney. A friend put him in touch with Mehul Devani. They communicated via phone/email: Devani saying “I can sell some of those flats (he said he mentioned a commission of 2%) APPARENTLY but Wells said he didn’t and said he was buying last for himself. Devani found buyers for 8 flats. Wells accepted these offers. Devani then sent a written copy of his express business terms which said “commission of 2% is payable on exchange of contract”. Wells refused to pay.

  • High court: Devani won: implied a term that commission would be due “on the introduction of a buyer who actually completes the purchase”

  • Gave business efficacy to the parties intentions.. a term which nobody would dispute if a officious bystander were to suggest it.

  • CoA overturned this: no legally binding contract. Wells was not obliged to pay the commission. The trigger event for payment of the commission was an essential term which had to be expressly agreed between the parties.

  • UKSC: Devani won on appeal

  • Evaluation point: A more onerous or unusual term would have to be expressly agreed.. no need to imply a term..so obvious it goes without saying. One party is an estate agent and he other is selling flats. It does not need to be expressly stated that 2% refers to the price received by W following the sale of the flats to a purchaser found by D as that is obvious from the contact

M&S PARIBAS UKSC clarified the law relating to implied terms stating that reasonableness should be judged