Contractual Terms: Implied Terms

Question 1

What are Implied Terms?

Answer 1

Implied Terms are terms not expressly agreed (not written or spoken).
This is to reflect the parties presumed intentions.

Question 2

When are Courts reluctant to imply terms

Answer 2

• When its based on freedom of contract
• A term will not be implied just becuase it seems fair

Question 3

What are the two sources of implied terms

Answer 3

• Common Law
• Statute (Mainly the Consumer Rights Act 2015)

Question 4

What are the four ways implied terms arise at common law

Answer 4

• Business Efficacy Test
• Officious Bystander Test
• Through Custom
• Course of Dealings

Question 5

Explain the Business Efficacy Test

Answer 5

A term may be implied where it is necessary to make the contract work in practice (i.e. it would be unworkable or pointless without it).

Question 6

What case implies the term based on the safety of the riverbed.

Answer 6

The Moorcock - A shipowner paid to moor a vessel at a dock. Riverbed was unsafe; ship damaged when the tide went out. Court implied a term that the dock owner must take reasonable care to ensure the dock was safe.

Question 7

Give a case that shows a term is only implied if its necessary, not just because its fair

Answer 7

Marks & Spencer v BNP Paribas- M&S ended a lease early and wanted a refund of rent paid in advance. The court refused to imply a term for refund. Held: A term is only implied if it is strictly necessary for the contract to function

Question 8

Explain the Officious Bystander Test

Answer 8

A term may be implied if it is so obvious that it “goes without saying.” For example, if an officious bystander suggested a term, both parties would reply “Of Course”

Question 9

What case established the Officious Bystander Test and shows obvious terms

Answer 9

Shirlaw v Southern Foundries - Shirlaw employed as managing director for 10 years. Company changed ownership. Court implied a that he could not be removed without cause during the 10 year period.

Question 10

Give a Case that shows the relationship between Officious Bystander and Businesss Efficacy

Answer 10

Confirmed in Marks & Spencer v BNP Paribas, A term can be implied if either test is satisfied.

Question 11

Explain Implied Terms Through Custom

Answer 11

A term may be implied where there is a well‑established custom of a particular trade or locality.

Question 12

What conditions must the Custom meet

Answer 12

• Certain and Clear
• Reasonable
• Not contradict an express term
• Known to the parties or widely accepted in the trade.

Question 13

What case shows a term may be implied when its based on an established arigcularal custom

Answer 13

Hutton v Warren - Tenant farmer carried out labour and planted seeds before lease ended and Lease said nothing about reimbursement. Custom in local farmings says they are entitled to compensation and the court held payment based on this custom.

Question 14

Limitations of Custom

Answer 14

• Custom cannot override an express term in the contract.
• Parties must not have expressly excluded the custom.

Question 15

Explain Course of Dealings

Answer 15

A term may be implied from previous consistent dealings between the parties. When regular, consistent, known and accepted by both parties.

Question 16

What case shows the seller could rely on a clause due to regular and consistent dealings.

Answer 16

Henry Kendall Ltd v William Lillico - Animal feed sold 3-4 times per month over 3 years containing an exclusion clause. Buyer never read the clause but could rely on it due to Course of Dealings.

Question 17

What case shows a term cannot be implied if the course of dealing is irregular or inconsistent

Answer 17

McCutcheon v David MacBrayne - used a ferry service several times, sometimes he signed a risk note other times he didnt. On one trip the ferry sank and the car was lost when he didnt sign. No Course of dealing, inconsistent.

Question 18

What case shows occasional transactions are insufficient

Answer 18

Hollier v Rambler Motors - Consumer used garage 3-4 times over 5 years. Dispute over exclusion clause for fire damage. Held not enough to imply the clause.

Question 19

What is the main way implied terms arise at statute

Answer 19

• Consumer Rights Act 2015

Question 20

When does the CRA 2015 apply

Answer 20

• Contracts between a trader and a consumer
• Contracts for supply of goods
• Contracts for supply of services

Question 21

Explain s9 for rights implied for goods

Answer 21

s9 Satisfactory Quality - Goods must be of satisfactory quality meaning what a reasonable person would expect. Considering the description, price, all relevant circumstances.

Question 22

Explain s10 for rights implied for goods

Answer 22

s10 Fit for Particular Purpose - if the consumer makes known a specific purpose to the seller and relies on the sellers advice, then the goods must be fit for that purpose.

Question 23

Explain s11 for rights implied for goods

Answer 23

s11 As Described - Goods must match their description including packaging, labels and online listings.

Question 24

Explain s20 for remedies for breach implied for goods

Answer 24

s20 Short-term right to reject - Can reject goods within 30 days of delivery and get a full refund.

Question 25

Explain s23 for remedies for breach implied for goods

Answer 25

s23 Repair and Replacement - If fault appears after 30 days, consumer can request repair or replacement, must be done within a reasonable time.

Question 26

Explain s24 for remedies for breach implied for goods

Answer 26

s24 Final right to reject or price reduction - if repair/replacement fails or isnt possible. Consumer can reject the goods and get refund, or keep the goods and get a price reduction.

Question 27

Explain s49 for rights that protect consumers implied for services

Answer 27

s49 Reasonable Care and Skill - the service must be performed with the care and skill of a compentent professional, and according to industry standards.

Question 28

Explain s51 for rights that protect consumers implied for services

Answer 28

s51 Reasonable Price - If no price is agreed beforehand, the consumer must only pay a reasonable price.

Question 29

Explain s52 for rights that protect consumers implied for services

Answer 29

s52 Reasonable Time - If no time is agreed, the service must be completed within a reasonable time.

Question 30

Explain s55 for remedies for Breach implied for services

Answer 30

s55 Repeat Performance - Consumers can demand that the service be done again properly, must be done at trader's expense and within a reasonable time.

Question 31

Explain s56 for remedies for Breach implied for services

Answer 31

s56 Price Reduction - If repeat performance is impossible or fails, consumer can claim a reduction in price