Implied Contract Terms

Implied Contract Terms

You can ask our solicitors for advice on implied contract terms using the question box on the front of our website or the following free legal advice guide may answer your questions.

Within contract law, implied contract terms are important and there are several different areas to take into consideration. When the court explores terms, which have been implied in fact, they are looking to establish that the intentions of the parties meant that a statement formed part of the contract. The court will always maintain, in every situation that they are not there to rewrite a contract.

It is their job to simply determine whether a statement was a term of the contract and how the dispute has arisen. 

implied contract

Efficacy Test

Terms implied in fact can be established through the business efficacy test. This will apply when the court needs to decide whether an implication of a given statement as a term is required to create a contract. A term must be required to ensure that the contract works properly. The knowledge of the parties involved and whether the involved parties agree to the terms of the contract will be used to establish intention.

Terms implied in law

Contracts are used everyday for low and high cost purchases of both products and services. Many of these contracts will include a standard set of terms that can be implied in the contract. This could, for example relate to the rental of a furnished property, contract of employment or a contract between a client and a consultant.

Implied terms in law do not need to be based on the intention of the involved parties. Some conditions or terms within a contract can be automatically implied if they are not expressly implied, unless the terms of the contract do not specifically state that they are not to be implied in the contract.

Two requirements must be present for terms to be implied in law. Firstly, the contract should be of a specific type and secondly the implication of the term is essential.

There may be particular terms within a contract that are standard for a particular industry, trade or profession. If the contract belongs to one of these areas and the customary terms have not been stated in an express way, the terms may be implied.

Innominate Terms

It would be beneficial at this stage to briefly look at conditions, warranties and what is known as innominate terms. When looking at breach of contract, each of these terms will be evaluated and used when identifying what potential remedies could be available.

When a condition of a contract is breached, the party who has suffered damage has the right to pursue legal action for damages and to terminate the contract. Further, when a warranty has been breached, the claimant can only sue the defendant for damages. When the breach relates to a warranty, the claimant does not have the right to terminate or rescind the contract.

If an innominate term has been breached, the right to rescind or sue for damages will very much depend on the nature and the individual circumstances of the case. Where an innominate term is breached and this breach means that the injured party is deprived of all the benefits they intended to gain from the contract, the claimant is entitled not only to sue for damages, they can also terminate the contract.

How Terms are Classified

You might be wondering how the terms of a contract can be classified. In many contracts, the terms will often depend on what intention the parties have. The majority of people will aim to have the terms classed as innominate because these types of terms offer the greatest flexibility. That being said, others may request that terms are classified as a condition because this offers greater certainty.

It also ensures that all parties involved in the contract know exactly what their position is and enables a breach of duty to be better understood and identified.

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