2. Implied terms:
• “An implied term is one that neither party has agreed to expressly, but
which is implied by the contract's other terms.
• The terms are not written out, but they are assumed to be accepted.
• They are not spoken or written, yet they are nevertheless legally
binding.
• Implied terms are those that are not specifically stated in the contract
but are treated as if they were and as if they had been included from
the beginning.
3. Marks and Spencer plc v BNP Paribas
Securities Services Trust Company (Jersey)
Ltd & Anr [2015] UKSC 72
• This case included a tenant's argument that a condition should be implied
into a lease stating that certain advance payments made for a period after
the lease expired should be reimbursed.
4. • It's significant because the Supreme Court used the opportunity to explain
the legal standard for suggesting conditions into contracts and to comment
on what Lord Hoffman's words in Attorney General of Belize v Belize
Telecom Ltd [2009] UKPC 10 in 2009 actually meant:
• There is only one question:
Is it what the instrument would reasonably be interpreted to indicate if
read in its entirety against the relevant background?
• Lord Neuberger stressed that these words did not mean that Lord Hoffman
was suggesting that reasonableness alone was a sufficient ground for
implying a term.
5. • The Supreme Court confirmed that the judgement did not involve any
relaxation of the traditional, highly restrictive approach to implication of
terms.
• Indeed, Lord Neuberger emphasised that these remarks should be
understood as observations and that the Supreme Court believed that some
had incorrectly suggested that this was what Lord Hoffman had intended.
Rather than official instruction on the law of implied terms, the discussion is
typically inspired.
6. • The Supreme Court was forced to restate the law on the implication of
phrases as a result of this.
• There are two sorts of implied contractual terms.
• The first, which was the subject of this case, is a term that is implied into a
contract based on the express terms, commercial common sense, and facts
known to both parties at the time the contract was made.
• The second type arises because, unless a term is expressly prohibited,
some statutes, such as the Supply of Goods and Services Act 1982, can
impose certain conditions into contracts.
7. • It must be reasonable and equitable;
• It must be essential to give the contract business effectiveness, so that no
term will be implied if the contract is effective without it.
• It must be necessary to give the contract business efficacy.
• It must be so evident that it goes without saying; it must be able to be
expressed clearly.
• It must not be in conflict with any specific contract term.
8. • Lord Neuberger made the following six additions to the principles:
• The implication of a word was not predicated on proof of the parties'
actual intent when negotiating the contract. If you approach the subject
from the perspective of what the parties would have agreed, what matters
is the hypothetical answer of notional reasonable people in the parties'
situation at the time they were contracting, not the hypothetical answer of
the actual parties.
• A term should not be inferred into a formal business contract simply
because it appears fair or because the parties would have agreed to it if it
had been proposed to them.
• These are required but insufficient reasons to include a term.
9. • It was debatable whether Lord Simon's first criteria (reasonability and
equity) would usually, if ever, add anything to the equation. It was difficult
to believe that a term would not be reasonable and equitable if it met the
other criteria
• Although the Judge expected that in fact, only one of those two
requirements would be satisfied, business necessity and obviousness can be
alternatives in the sense that only one of them must be satisfied.
• If one views the problem via the lens of the suspicious bystander, it is
critical to develop the question that the bystander will ask with extreme
caution and care.
10. • A value assessment is required for company efficiency.
• A more useful criteria would be that a term can only be implied if the
contract would be commercially or practically incoherent without it.
• The Supreme Court stated that in most, if not all, disagreements over
whether a term should be implied into a contract, the issue of an implied
term is reviewed only after the process of construing the express language
is completed.
• It's impossible to know whether or not a term should be implied, and if so,
what term, until you know what the parties have specifically agreed to.
• If an implicit term contradicts an express term, the contract cannot be
enforced.
11. • As a result, you cannot judge whether a term can be implied as a
logical starting point until the stated provisions of a contract have been
reviewed and comprehended”.
