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CAPE LAW UNIT 2: PRIVATE LAW

MODULE 2: CONTRACT LAW

Topic 4: Contractual Terms pt 1 Express and Implied Terms

TERMS OF THE CONTRACT

Terms vs Representations

The terms of a contract are otherwise known as the contents of the contract and they represent what the
parties have agreed to do or to give under the contract. In other words, they represent the obligations that the
parties make to each other. A term is an expression of willingness by both parties to be bound by the obligation
contained in it and if a term is breached, or not complied with, it will give the other party the right to sue. The
terms of a contract represent the outcome of the pre-contractual negotiations between the parties.

The statements made by the parties in the pre-contractual stage are generally described in contract law as
representations. In other words, any statement made at the time of contracting or before the contract is formed
is referred to as a ‘representation.’

The distinction between terms and representations is:

Terms
Any statement by which the parties to the contract do intend to
be bound does also therefor form part of the contract and can
be relied upon by the parties. These are the express terms of the
contract and if they are not complied with there will be a breach
of contract.
Representations
Any statement made by either party to the contract which may
or may not have been intended to induce the other party to
enter the contract but was not intended to form part of the
contract. The representation may be as to current facts or as to
intention of the parties.

Types of Representations and their consequences

There are some statements made at the time the contract was formed or in the negotiations leading up to
formation that will attach no liability and have no legal significance. This is because the courts can find no
reliance placed upon them by the parties, or because no sensible person would believe that they would induce
a party to enter a contract. They are:

Trade Puffs: puffs are mere boasts or unsubstantiated claims. They are commonly made by advertisers
of products or services. They are often nothing more than a catchy gimmick used in order to highlight
the product that is being sold. ‘Magnum is the best tonic in the world’ is an obvious example of such a
boast. It is an exaggerated claim made to boost the saleability of the product. No obligations are created
because no reliance can be place upon them as it is felt that nobody would actually take them seriously
or be taken in by them. However, the closer the maker of the statement gets to making what appears to

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be a factually based statement e.g. ‘Magnum is excellent for energy and repair as it contains x amounts
vitamins and minerals’ the more a risk is run of the puff achieving legal significance.

Mere Opinion: Some statements made by a party to a contract attach little legal significance because
they lack any weight and the other party ought not to rely on them. An example of these statements is
a mere opinion. An opinion does not carry any liability for the party making it because it is not based on
facts. Case on point:
Bisset v Wilkinson [1927] AC 177: A vendor was selling two blocks of land in New
Zealand. The purchaser was intending to use the land for sheep farming, though it had
not previously been used for that purpose, although sheep had formerly been kept on a
small part of the land. the vendor in response to a request by the purchaser made a
rough estimation that in his judgment the land could support 2000 sheep. In fact, it could
support nowhere near that number and did indeed prove impractical as a sheep far. The
purchaser sued and argued that the statement was an actionable misrepresentation.
The Privy Council held that, because of the inexperience on which it was based, it was
nothing more than an honest opinion and was not actionable therefore because, as such,
no reliance could be placed on it.

The outcome could, of course be different if the statement of opinion were known to be untrue by the party
expressing it. in such a case the statement would be actionable as a misrepresentation.

In contrast to mere opinion, a party will be able to sue on the basis of a false opinion which has been stated by
a party with specialist expertise in the field, and therefore who is in a superior bargaining position to the party
to whom it is addressed. This is clearly the case because otherwise the party with expertise would be in a
position to take an unfair advantage over the other party. Liability for the expert opinion may apply even though
the opinion was expressed without actual knowledge of its falsehood at the time of making it. Case on point:

Esso Petroleum Co Ltd v Marden [1976] QB 801: Esso acquired a site on which it
proposed to build a petrol station. On the basis of professional estimates, it represented
to Marden, a person intending to take on the franchise, that the filling station would
have a throughput of 200,000 gallons per year. In fact, the local authority refused
planning permission for the proposed layout of the petrol station. The result of this was
that the pumps would be at the back of the site, and access to it would only be from side
roads at the rear rather than from the main road at the front of the site. Marden queried
the throughput figure but Esso assured him it would be possible. Despite Marden’s best
efforts, sales only ever reached 78,000 gallons; he lost money and was unable to pay
back a loan from Esso. Esso eventually sued from repossession of the site and Marden
counter-claimed. One of Esso’s arguments in defence was that the statement as to the
likely throughput of petrol was a mere opinion. This argument failed to convince the
court because of its extensive expertise in the area. Marden was able to rely on the
estimate as though it was a factual statement.
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Mere Representations: Where a party to a contract has made a representation as to fact, which is
intended to induce the other party to enter the contract, but which is not intended to form part of the
contract, and it is in fact true, there can be no further contractual significance. What has been offered
under the contract has been delivered and the contract is in fact complete. This is referred to as a mere
representation. On the other hand, where a representation has been made so as to induce a party to
enter a contract and they have done so, if the representation had been falsely made then there may well
be further legal consequences. It may amount to a misrepresentation.

**The basic distinction between a representation and a term is that a term involves a promise as to the truth of
the statement whereas a representation involves no such promise as to truth, although the statement in
question does induce the making of the contract. Both representations and terms give rise to legal
consequences. If the representation is false, then it amounts to a misrepresentation. If the term is broken than
it amounts to a breach of contract. In essence they are distinguished by the legal consequences attached to
them.

EXPRESS TERMS
__________________________________________________________________________________________

Express terms are those which are agreed upon by the parties at the time the contract is formed. These terms
may arise in many different ways since contracts can be formed in writing, orally or by conduct. The biggest
issue is whether a statement is just that or a term of the contract. Where a contract is in writing then the process
of distinguishing whether a statement is a term is simpler because the terms are stated in the written contract.
However, where negotiations leading up to the contract are oral, the courts have developed guidelines to
determine whether a particular statement is a term of the contract or not.

Where there have been statements made prior to a contract, and there is then a dispute as to whether or not
there were intended to form part of the contract, how do the courts resolve the issue? The courts approach is
to try to determine the intentions of the parties. In doing this, the court adopts an objective analysis basing their
decision on what a reasonable man would consider was in the mind of the parties at the time they formed the
contract. The following factors have been utilised by the court to determine whether a statement is
incorporated as a term:

1. The importance attached to the representation

The more importance is attached to the statement by either party then the more likely it is that it is a term.
Where a party relied on a statement to the extent that without it being incorporated into the contract as a term
it is unlikely that the party would have entered the contract, then the provision identified in the statement is
usually accepted as a term. To do otherwise would be to ignore the intention of that party. Case on point:

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Birch v Paramount Estates (Liverpool) Ltd [1956] 16 EG 396: Here, a newly-wed couple
bought a new house from developers. They agreed to buy on the basis of a promise
made to them that the house wold be ‘as good as the show house’. In fact, the house
was not as good as the show house. The Court of Appeal concluded that the statement
was so central to the agreement that it had been incorporated into the contract as a
term. The couple would have been unlikely to contract but for the statement upon which
they relied.

Couchman v Hill [1947] KB 554: In a written agreement for the sale of a heifer the
conditions of sale included a clause that lots were sold ‘with all faults, imperfections and
errors of description’. The sale catalogue actually described the heifer as unserved (not
yet used for breeding). Prior to the making of contract, the buyer asked both the
auctioneer and the seller to confirm that the heifer was unserved, and they both assured
him that it was. Relying on these assurances, he bought the heifer. However, not long
afterwards he discovered that the heifer was having a calf, and it in fact died as a result
of having a calf at too young an age. The Court of Appeal concluded that, despite the
written terms in the contract, the representation was so crucial to the buyer in making
the contract that it was incorporated as a term. It was more than a misrepresentation
that would have induced him into entering the contract but formed part of the
obligations under it.

Bannerman v White [1861] 10 CBNS 844: During negotiations for the purchase of hops,
the defendant purchaser stated that ‘if they have been treated with sulphur I am not
interested in even knowing the price of them’. The seller gave assurances that they had
not, which were repeated when the same question was asked of samples that were
produced. In fact, some of the crop had been treated with sulphur. When he discovered
this, the defendant then repudiated the contract. The claimant argued that the
discussions were only preliminary to the contract and not part of it. the court, however,
accepted that the stipulations regarding sulphur amounted to a condition of the contract
which was therefore breached. The repudiation was justifiable.

if the statement maker accepts responsibility for the truth of a statement, the statement is likely to be regarded
as a term, because in accepting responsibility the statement maker is guaranteeing its truth. Case point:

Schawel v Reade [1913] 2 IR 81: the claimant stopped examining a horse when told by
the defendant that the horse was sound and that there was no need to continue the
examination.

Even where the matter is of importance to the recipient of the statement, however, the maker will not be taken
to have intended to guarantee its truth if it has been made clear that the truth should be verified independently.
Case of point:

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Ecay v Godfrey [1947] 80 Lloyd’s LR 286: The seller of a boat made statements as to its
condition, but also advised the buyer to have it surveyed. In this situation, it was clear
that the seller could not be taken to have intended his statements to have formed part
of the contract. The same principle would apply where such verification would normally
be expected, even if it has not been actively encouraged. This will normally be the
position for example, in relation to the sale of real property.

2. Special Knowledge or skill affecting the equality of bargaining strength

If there is an imbalance of skill and knowledge relating to the subject matter of the contract as between the
claimant and defendant, this will be relevant in deciding whether an oral pre-contractual statement should be
treated as a contractual term. The courts are willing to accept that statements made by parties with specific
expertise relevant to the contract can be relied upon. However, where the statement is made without any
particular expertise or specialist knowledge to support it. It is less likely to be construed as a term. Cases on
point:

Oscar Chess Ltd v Williams [1957] 1 WLR 370: The defendant, an ordinary motorist, sold
his car to motor dealers for £290. Prior to the conclusion of the contract, the defendant
had innocently told the claimant motor dealers that the date of the car was 1948, when
in fact it had been first registered in 1939. When this was later discovered the motor
dealers sued for breach of contract, since the value of the car was obviously lower than
the price that they had given and arguing that the statement as to the age of the car was
part of the contract. Their action failed. The Court of Appeal held that, on the basis of
the fact that the claimants had the greater skill and knowledge of such matters, the
statement should not be regarded as a term. The intelligent bystander, looking at all the
circumstances, would not say that the seller intended to guarantee the age of the car.
The seller was in no position to do so, since all the could rely on were the car’s
registration documents, and he had no means of determining whether they were
accurate. The purchaser on the other hand, being the motor trade could, for example,
have taken the engine and chassis numbers and checked with the manufacturer.

Dick Bentley Productions ltd v Harold Smith (Motors) Ltd [1965] 1 WLR 623: The
claimant asked the defendants, who were car dealers, to find him a ‘well vetted’ Bentley
car, he wanted one in good condition. The defendants found a car that they falsely stated
had only done 20,000 miles since being fitted with a new engine and gearbox. In fact, it
had done 100,000 miles. The claimant later found the car to be unsuitable, as well as
discovering that the statement about the mileage was untrue, and sued for breach of
contract. The Court of Appeal upheld the claim since the claimants relied on the
specialist expertise of the car dealers in stating the mileage. It was a term of the contract
on the basis that the defendant was a car dealer who should be taken to have better
knowledge of such matters than the claimant, who was not involved in motor trade.

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3. The time between making the statement and formation of the contract

Sometimes the court may assess the time lapse between the statement made in the negotiations and the
creation of the contract itself, particularly if there is a major difference between the two. Generally, the courts
will hold that the longer the time difference between the two, the less possible it is to support any claim that
the statement was in fact incorporated into the contract as a term. The closer in time that the statement was
made to the conclusion of the contract, the more likely it is that it was a matter of importance to the claimant,
and should therefore be treated as a contractual term. Case on point:

Routledge v Mckay [1954] 1 WLR 615: the defendant, who was selling a motorbike, had
told the claimant that the date of the bike was 1942. In fact, it dated from 1930. A week
elapsed between the defendant’s statement and the making of the contract. The Court
of Appeal held that the defendant’s statement was not a term of the contract, the lapse
of time was too wide to create a binding relationship based on the statement.

4. Reducing the agreement, including the statement to writing

Written evidence is more powerful and convincing than the spoken word. As a result, where a contract is made
in a written document and a statement made orally between the parties is not then included in the written
document, the court will generally infer that it was not intended to form part of the contract but is a mere
representation. Case on point:

Routledge v Mckay [1954] 1 WLR 615: the purchaser of the motorcycle had prepared a
written memorandum at the time of the sale. Since the written agreement made no
mention of the age of the motorcycle. The court held that it had not been considered
important enough to be a term

This rule is not absolute and if the party can show that the term which was not included was of the utmost
importance, then the courts may be prepared to allow it to be added. This is most likely to be the case where
the written contract is in standard form, rather than the result of individual negotiation:

Evans & Son ltd v Andrea Merzario Ltd [1976] 2 ALL ER 65: the claimants made a
contract for the transport of machinery by sea. They had made it clear to the defendants
that it was of great importance that the machinery should not be carried on deck. The
defendants had given an oral assurance that the claimant’s machinery would not be
carried below deck. The printed standard conditions for the contract, however, allowed
for freight to be carried on deck. The claimant’s machinery was carried on deck and was
lost overboard. The it was held by the Court of Appeal that in this case the verbal
assurance took precedence over the written conditions. The statement that the
claimant’s goods would be carried below deck was a contractual term.

A party is general bound by anything that he has signed, whether or not he has read it. the rule provides a great
deal of certainty in forming contracts and is of obvious benefit in commercial transactions. Case point:

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L’Estrange v Graucob [1934] 2 KB 394: the claimant bought a vending machine from the
defendants on a written contract which in small print contained the clause ‘any express
or implied condition, statement or warranty, statutory or otherwise not stated herein is
hereby excluded’. The machine turned out to be unsatisfactory and the claimant claimed
for breach of an implied term as to fitness for purpose under the sale of goods act. She
argued that she had not read the clause and had no knowledge of what it contained. She
failed. It was held that when a document containing contractual terms is signed, then, in
the absence of fraud or misrepresentation, the party signing it is bound and it is wholly
immaterial whether he has read the document or not. Having put her signature to the
document and not having been induced to do so by fraud or misrepresentation, it cannot
be heard to say that she is not bound by the terms of the document because did not
read them.

5. The extent to which the term is effectively drawn to the notice of the party subject to it

In general, a term will not be accepted as incorporated into the contract unless it is brought sufficiently to the
attention of the party subject to it prior to or at the time the contract is made. The party subject to an alleged
term must have real knowledge of it before entering the contract or a court may not accept that it has been
incorporated into the contract. Case on point:

O’Brien v MGN Ltd [2001] ALL ER (D) 1 August: the claimant bought a copy of the Daily
Mirror containing a scratch card. On the card was printed ‘for rules and how to claim,
see z’. The claimant bought another Daily Mirror containing a scratch card on a later day.
The card and paper contained the words ‘normal Mirror rules apply’. This second card
showed a £50,000 prize but, because of a mistake, 1,472 other people were also told
that they had won. The competition rules provided for a draw to take place in the event
that there were more winners that prize money available. The paper organised a draw,
with one prize of $50,000 to be divided between all the others £34 each. The contract
included the phrase ‘normal Mirror rules apply’ and so it was held that the this was
sufficient incorporate the terms. The newspaper had done just enough to bring the
terms to the attention of the claimant since the rules were referred to on the back of
each card and were available at the offices of the paper and in back issues of the paper.

The Parole Evidence Rule

This rules states that if the contract is written then that writing is the whole contract and the parties cannot
adduce extrinsic evidence, and especially oral evidence, to ‘add to, vary or contradict that writing (Henderson v
Arthur [1907] 1 KB 100). The justification for this rules was that if the contract had been produced in written
form then it was only logical for the court to suppose that anything omitted from the written document actually
formed no part of the contract. Also, the clear danger of adding terms into the agreement after the written
agreement was accepted would lead to uncertainty.

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The problem with rule, however, is that many contracts are partly written and partly oral, some contracts consist
of more than one document. This rule only applies to express terms. Since it is so onerous, some tests have been
devised to circumvent it, namely:

Custom or trade usage

Rectification
Contract partly written and partly oral
Collateral contracts

IMPLIED TERMS
__________________________________________________________________________________________
There are occasions when terms will be implied into a contract, even though they do not appear in a written
agreement or in the oral negotiations that have been taken place leading up to the contract. The implication of
terms might be considered controversial since it frequently amounts to filling the gaps in the contract so that
the courts may be accused on making the contract for the parties and/or interfering with contractual certainty
i.e the ability to rely on the express terms of the contract as representing the parties’ agreement without the
risk of any ‘extra terms’.

However, the courts have justified the implication of terms to fill gaps on the basis of giving effect to the deemed
intentions of the parties and/or on the basis of necessity. Statute implies terms in some circumstances in order
to give effect to policy objectives.

Terms may be implied by:

1. Custom or as a result of a trade usage or business practice

2. Courts:
I. Either by implication into the particular contract to reflect the parties’ objective intention and to
make the contract work (terms implied in fact)
II. By implication into all contracts of a particular type on the basis that the term is a necessary
incident of that type of contract (terms implied in law)
3. Statute

They will be discussed in turn.

CUSTOM-1

There is an old maxim that ‘custom hardens into right’. In other words, if something has happened in a particular
way over a long period of time then it is likely that it will be established that it has evolved into an actual and
enforceable right. In order for a term to be implied by custom, the term must be clearly established and
‘notorious’ i.e well known within the trade context. Cases on point:

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Hutton v Warren [1836] 150 ER 517: In this case a long-standing local custom was to the
effect that on termination of an agricultural lease, the tenant would be entitled to an
allowance for seed and labour on the land. This was an important custom at a time when
the majority of the population was engaged in subsistence agriculture. There was
nothing in the lease to this effect. The court held that the lease made by the two parties
must be viewed in the light of this custom.

The person wishing to rely on the custom must produce convincing factual evidence of its existence and general
acceptance. Assuming that there is sufficient evidence, the courts will imply a term to give it effect. Case on
point:

British Crane and Hire Corp Ltd v Ipswich Plant Hire Ltd [1975] QB 303: this concerned
a contract for the hire of an earth-moving machine, together with a driver, and the issue
was who was responsible for the cost of pulling it out of marshy land in which it had
become stuck. One of the factors which the Court of Appeal regarded as relevant was
that there was evidence that it was normal practice in the trade for liability to be placed
on the hirer, rather than the owner. This, together with the fact that the hirers had
previously contracted with the owners on such terms, led to the implication that liability
should rest with the hirer.

Such implication will not be possible, however if the contract contains an express term which is inconsistent
with the custom. In that case, the express term will prevail over the custom. Case on point:

Les Affreteurs Reunis SA v Leopold Walford (London) Ltd [1919] AC 801: Walford was
suing for a commission of 3 per cent that he had been promised as a result of negotiating
a charterparty (contract for the hire of a ship) between Lubricating and Fuel Oil Co Ltd
and the owners of SS Flore. The commission had actually been mentioned in the contract
between the two parties but since Walford was not a party to that contract he was
unable to enforce it according to the privity rule. One arguments of the defendant was
that there was a custom that commission was payable only when the ship had actually
been hired. The French government had requisitioned the ship before the charterparty
had actually occurred. If the custom was accepted then it would conflict with the clause
in the contract requiring payment as soon as the hired agreement was signed, so it was
held not to have been implied into the contract.

THE COURT-2

I. Terms implied in fact: Terms are implied in fact on the basis of an intention imputed to the parties from actual
circumstances as a process of construction of the contract in question. The courts will imply a term if they
consider that it represents the true intention of the parties on a particular issue. In other words, the term is
implied not as a matter of law, but on the basis that, as a matter of fact, this is what the parties had agreed,
though the agreement was implicit rather than explicit.

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The case of BP Refinery Pty Ltd v Shire of Hastings [1977] 180 CLR 226 summarised the conditions thought
necessary to imply a term in fact. They are: 1. It must be reasonable and equitable; 2. It must be necessary to
give business efficacy to the contract, so that no term will be implied if the contract is effective without it; 3.it
must obvious that it goes without saying; 4. It must be capable of clear expression; 5. It must not contradict any
express term of the contract.

The two test will which will be discussed are the ‘business efficacy test’ and the ‘officious bystander test’

The Business Efficacy Test

The test provides for the law to imply a term with the object of giving the transaction such efficacy as both
parties must have intended that it should have. Case on point:

The Moorcock [1889] 14 PD 64: the case concerned a contract which involved the
claimant’s ship loading and unloading at the defendant’s wharf in the Thames. The
Thames being a tidal river, at low tide the ship, as both parties knew would be the case,
settled on the river bed. Unfortunately, the ship was damaged because of a ridge of hard
ground beneath the mud of the bed. The owner sued for breach of contract because the
mooring was unsuitable, but there was no express term in the contract as to the
suitability of the river bed for mooring a ship there. The Court of Appeal held that a term
could, and should be implied to the effect that mooring was suitable. The reason for this
was that without such a provision, the contract would have effectively been unworkable.
It was in implicit in the contract for the mooring of a ship that it would have to rest on
the bottom of the river. Both parties must have contracted on the basis that it was safe
to do so. On this basis, the court felt that it must have been the parties’ intention that
the owners of the wharf should warrant that the river bed was suitable for the purpose
of the contract.

The test being applied here is a stringent one. It is not based on the reasonable expectation of the owner of the
ship, but rather what is necessary in order to make the contract work at all. This case established a test of
necessity. The reason why necessity is a good test for the implication of terms is that it must be regarded as a
sure guide as to what the parties intended. If a contract will not work without the inclusion of a particular term,
it is a reasonable assumption that the parties intended that term to be included in the contract.

The Officious Bystander Test

This test was laid down in Shirlaw v Southern Foundaries Ltd [1939] 2 KB 206 by Mackinnon LJ when he stated:

“Prima facie that which in any contract is left to be implied and need not be expressed
is something so obvious that it goes without saying; so that if, while the parties were
making their bargain, an officious bystander were to suggest some express provision for
it in their agreement, they would testily suppress him with a common “Oh of course!”

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The basic problem with the test is that while one party will usually be all too willing to accept that the implied
term at issue was what he actually intended to be a part of the contract, the other party almost inevitably will
be arguing the exact reverse. In those circumstances it is somewhat artificial to say that the term implied actually
does represent the true intentions of the parties. This test is a strict one, in that there will be relatively few
provisions of such obviousness that they will satisfy the ‘officious bystander’ test.

The New Approach**

The single question determining the implication of a term in fact was stated by Lord Hoffman in AG of Belize v
Belize Telecom Ltd. He said “in every case in which it is said that that some provision ought to be implied in an
instrument, the question for the court is whether such a provision would spell out in express words what the
instrument, read against the relevant background, would reasonably be understood to mean. The test is
therefore now one of construction of the contract only and whether it reflects what a reasonable person would
understand it to mean. The officious bystander and the business efficacy test are regarded merely as ways to
explain what the contract means, and what it does not mean.

Attorney General for Belize v Belize Telecom Ltd [2009] UKPC 10: The process of
implication of a term in fact is one of construction of the content of the contract to
identify the parties’ intention through the meaning ‘which the instrument would convey
to a reasonable person having all the background knowledge which could reasonably be
available to the audience to whom the instrument is addressed. If the reasonable
addressee would consider ‘that the only meaning consistent with the other provisions
of the instrument, read against the relevant background, is that something is to happen’
if this event occurs, then the court will imply a term providing for what is to happen if
that event occurs. The court has no power to improve upon the construction which it is
called upon to construe, it cannot introduce terms to make it fairer or more reasonable.

It follows then that in every case in which it is said that some provision ought to be
implied in an instrument, the question for the court is whether such a provision would
spell out in express words what the instrument, read against the relevant background,
would reasonably be understood to mean.

In summary terms implied in fact must be: 1. Implied on a ‘one-off’ basis into this particular contract; 2. based
on construing the contract so that it reflects what a reasonable person would understand it to mean; 3.
Necessary to achieve that construction and achieve contract workability.

II. Terms implied in law: Terms implied in law do not depend upon any intention imputed to the parties. They
consist of legal obligations generally imposed on one of the parties in a common contractual relationship
without reference to the particular circumstances. Case on point:

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Shell Uk Ltd v Lostock Garages Ltd [1976] 1 WLR 1187: this case concerned a contract
under which a garage owner agreed to buy petrol exclusively from Shell. Subsequently,
at a time when there was a petrol price war, the garage owner discovered that Shell was
supplying other petrol stations in the area at a lower price. This was having a disastrous
effect on the business. The garage owner was arguing that a term should be implied to
the effect that Shell would not discriminate against him in the terms on which it supplied
the petrol. The majority of the Court of Appeal held that no such term could be impaired.
In coming to his conclusion, Lord Denning emphasised the difference between terms
implied in fact and terms implied in law.

Terms implied in fact involved deciding what the parties themselves would have put into
the contract had they addressed themselves to the issue. Lord Denning thought that the
required term could not be implied on that basis, because it was highly unlikely that Shell
would have agreed to the inclusion of such a term if this had been requested by the
garage owner. Terms implied by law, however, do not depend on determining the
intention of the parties. The court in this case will impose the term on them, whether
they would have agreed to it or not.

Two conditions need to be satisfied before this can be done, however, first, the contract
has to be of a sufficiently common type (seller/buyer, owner/hire, employer/employee,
landlord/tenant) that it is possible to identify the typical obligations of such a contract.
Second, the matter to which the implied term relates must be one which the parties
have not in any way addressed in their contract. There must be a clear gap to be filled.
In the present case, the garage owner failed the first test.

The basis for the implication of terms in this way appears to be the desire to regulate certain common types of
contract. It is done so that one party does not take unfair advantage of another, and so adequate protection is
given to both parties.

Liverpool City Council v Irwin [1977] AC 239: the council let flats in a tower block to
tenants. The lifts and rubbish chutes of the tower block constantly broke down. The
tenancy agreement imposed certain obligations on tenants but was silent about the
obligations of the council to maintain the building. The tenants withheld their rent in
protest at the council’s failure to maintain the building properly. The council brought an
action to obtain possession and the tenants counterclaimed for breach of an implied
obligation to keep the block in proper repair.

The House of Lords was unwillingly to imply a term in fact into the particular agreement.
However, their lordships were willing to imply, as a necessary incident of all tenancy
agreements in which the tenants are granted the use in common of stairways, corridors,
lifts etc. an obligation on the landlord to take reasonable care to keep in reasonable
repair and usability the common parts.
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The test is one of reasonableness. It is established that the agreement is one of common occurrence and that it
is incomplete, the courts will themselves decide what term should be implied in order to make the contract
work reasonably in relation to a contract of this type.

Crossley v Faithful & Gould Holdings Ltd [2004] EWCA Civ 293 said the decision to imply terms in law rested
on questions of ‘reasonableness, fairness and balancing competing policy considerations’ rather than
necessity.
In summary, terms implied in law must be: 1. Implied as a matter of policy into all contracts of a particular type;
2. A necessary incident of this type of contract i.e necessary because of the contract’s subject matter and 3. A
reasonable term to imply.

STATUTE-3

There are two reasons why it may be appropriate for Parliament to enact that certain provisions should be
implied into all contract of a particular type:

1. Efficiency: if it is virtually universal practice for certain terms to be used in particular contractual
relationships, there is no need for the parties to state them specifically every time. In terms of economic
analysis, there is a saving in ‘transaction cost’. The parties can rely on the statutory formulation as
representing their obligations.
2. Protection of one of the parties: it may be thought that a particular type of contractual relationship is
likely to involve inequality of bargaining power, so that, unless protective provisions are implied, the
weaker party may be forced into a very disadvantageous bargain.

Please read the following sections of the Acts listed below:

The Jamaica Sale of Goods Act 1979: sections [12, 13, 14, 15]

The Jamaica Consumer Protection Act 2005: Part IV, Part V, Part VI

The Jamaica Hire Purchase Act 1979: sections [8, 9, 10, 11, 12]

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