When drafting a contract the terms are key. What many people fail to consider is that there may be more terms than those you have expressly agreed to which the parties may be subject to. These are called implied terms and quite often you won’t even know they are there.
Implied terms are terms which may be implied to a contract by the Court. Such terms may exist because of the following concepts which have developed through case law over the years and include:-
1. Previous Dealings where the parties have had previous dealings and such a term is consistent with those dealings;
2. Usage or Custom where the term is customary to a particular trade or place where it is being made;
3. Intention to give effect to the parties’ intentions;
4. Common Law to effect common law, ie an employment contract; and
5. Statute to give effect to statute. One such notable statute is the Consumer Rights Act 2013 which imposes a significant number of obligations on suppliers in consumer contracts which are implied into the contract. Anyone preparing a contract for a consumer customer needs to make sure they are familiar with their obligations, which may include; a short time right to reject, certain pre-contract information to be provided to customers, rights as to the quality of the goods etc.
Whilst it may be possible to exclude an implied term where they fall under 1-4 above (if such a term can be pre-empted that is) many statutes will expressly state where certain provisions cannot be excluded within contracts and so will still stand even if a contract says they do not. For example; a party may not exclude liability for personal injury or death arising as a result of negligence and so any contradicting term would have no effect. [Part 2, Section 65 Consumer Rights Act 2013]
The Court will apply the following tests to determine whether such a term should be implied:-
a) Business Efficacy Test – is it necessary to give business effect to the contract? and
b) Officious Bystander Test – would a bystander consider the term is so obvious it should be implied.
The Court will not seek to imply a term where the contractual terms are already effective [as was confirmed in the case of Marks and Spencers plc v BNP Paribas Securities Services Trust Company (Jersey) Limited and another.]
It is for this reason it is especially important to make sure that when drafting your contracts, you take extra care to consider any terms that could potentially be implied.
If you want advice on how to best deal with these issues please give Laura Clarke a call on 01626 202404.