Terms implied by statute

For example, under the SoGA 1979, terms relating to description, quality and fitnessfor purpose are all implied into sale of goods contracts.

Terms implied by custom

An agreement may be subject to customary terms not actually specified by the parties. For example, in Hutton v Warren it was held that customary usage permitted a farm tenant to claim an allowance for seed and labour on quitting his tenancy. It should be noted, however, that custom cannot override the express terms of an agreement

Terms implied by the courts

Generally, it is a matter for the parties concerned to decide the terms of a contract, but on occasion the court will presume that the parties intended to include a term which is not expressly stated. It will do so where it is necessary to give business efficacy to the contract.

            Whether a term may be implied can be decided on the basis of the ‘officious bystander’ test. Imagine two parties, A and B, negotiating a contract. A third party, C, interrupts to suggest a particular provision. A and B reply that that particular term is understood. In such a way, the court will decide that a term should be implied into a contract.

            In The Moorcock the appellants, the owners of a wharf, contracted with the respondents to permit them to discharge their ship at the wharf. It was apparent to both parties that, when the tide was out, the ship would rest on the river bed. When the tide was out, the ship sustained damage by settling on a ridge. It was held that there was an implied warranty in the contract that the place of anchorage should be safe for the ship. As a consequence, the shipowner was entitled to damages for breach of that term.

EXEMPTION OR EXCLUSION CLAUSES

In a sense, an exemption clause is no different from any other clause, in that it seeks to define the rights and obligations of the parties to a contract. However, an exemption clause is a term in a contract which tries to exempt, or limit, the liability of a party in breach of the agreement. Exclusion clauses give rise to most concern when they are included in standard form contracts, in which one party, who is in a position of commercial dominance, imposes their terms on the other party, who has no choice as far as the terms of the contract go. Such standard form contracts are contrary to the ideas of consensus and negotiation underpinning contract law; for this reason, they have received particular attention from both the judiciary and the legislature, in an endeavour to counteract their perceived unfairness. A typical example of a standard form agreement would be a holiday booking, made on the terms printed in a travel brochure.

            The actual law relating to exclusion clauses is complicated by the interplay of the common law, the Unfair Contract Terms Act 1977 and the various Acts which imply certain terms into particular contracts. However, the following questions should always be asked with regard to exclusion clauses:

• Has the exclusion clause been incorporated into the contract?

• Does the exclusion clause effectively cover the breach?

• What effect do UCTA 1977 and the Unfair Terms in Consumer Contracts

   Regulations 1999 have on the exclusion clause?