Implied Terms in Contracts

Some things in an agreement between the parties are taken as read to the point that they are not mentioned at all. This can be a dangerous position to be in for the parties as it can give rise to ambiguities which can often lead to disputes.

The advice on this point is simple. If something is of importance to you then take the trouble to set it out in the contract in no uncertain terms.

What does the law say? In ordinary circumstances in order for a term or provision to be implied into a contract ultimately a court will decide. The court will consider the implied term in the context of the following 4 or 5 necessary elements:

  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 be so obvious that it goes without saying
  4. it must be capable of clear expression and
  5. it must not contradict any express term.

Some lawyers debate as to whether (2) and (3) are cumulative or alternatives but ultimately a court will decide on this point.

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