Implied Terms in Contract Law

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What is the purpose of implied terms in a contract?

To make the contract longer

To make the contract more complex

To give business efficacy to the contract or to reflect the presumed intentions of the parties (correct)

To favour one party over the other

What are implied terms in contract law?

Terms that are optional in a contract

Terms that are explicitly stated in the contract

Terms that are not expressly stated in the contract but are nonetheless understood to be part of the agreement (correct)

Terms that are only applicable in certain industries

From where can implied terms arise?

From various sources, including the parties' intentions, statutory provisions, common law principles, industry customs, or previous dealings between the parties (correct)

Only from statute

Only from common law principles

Only from the contract itself

Why are implied terms crucial in contract law?

Because they ensure that contracts are complete, fair, and workable Signup and view all the answers

How do courts imply terms into a contract?

By usage and custom; previous course of dealings; intention of the parties; statute; and common law Signup and view all the answers

What role do implied terms play in contract interpretation and enforcement?

A significant role, filling in gaps and ensuring contracts are complete, fair, and workable Signup and view all the answers

What is the main characteristic of implied terms?

They are never explicitly stated in the contract Signup and view all the answers

What is the effect of implied terms on a contract?

They ensure that contracts are complete, fair, and workable Signup and view all the answers

What is the primary distinction between express and implied terms in a contract?

Express terms are in writing, whereas implied terms usually derive from oral negotiations Signup and view all the answers

What is the purpose of the 'obvious' or 'officious bystander' test in contract law?

To determine whether a term should be implied into a contract Signup and view all the answers

What is the outcome if a party breaches an implied term in a contract?

The innocent party can recover damages only Signup and view all the answers

What is the characteristic of an express term in a contract?

It is specifically negotiated by the parties Signup and view all the answers

What is the role of the court when applying the 'obvious' or 'officious bystander' test?

To consider whether a term is so obviously necessary for the contract to function properly Signup and view all the answers

What is the basis for implied terms in a contract?

The law or the facts of the case Signup and view all the answers

What is the primary purpose of the parol evidence rule?

To prohibit the admission of oral evidence that contradicts written agreements Signup and view all the answers

What is the purpose of collateral contracts?

To address situations where one party relies on oral assurances Signup and view all the answers

Under what circumstances can evidence of oral assurances be admitted?

When it constitutes a collateral contract Signup and view all the answers

What is allowed under Section 92(b) of the Evidence Act 1950?

Separate oral agreements on matters not addressed in the written document Signup and view all the answers

What is the effect of the parol evidence rule on written agreements?

It prohibits oral evidence that contradicts written agreements Signup and view all the answers

What is the relationship between collateral contracts and written agreements?

Collateral contracts are used to address situations where oral assurances are not included in the written contract Signup and view all the answers

What is the scope of the parol evidence rule?

It only applies to written agreements Signup and view all the answers

What is the purpose of Section 92 of the Evidence Act 1950?

To prohibit the admission of oral evidence that contradicts written agreements Signup and view all the answers

What is the primary purpose of a collateral contract in the legal context?

To induce one party to enter into the main contract Signup and view all the answers

What is a significant aspect of collateral contracts in the legal context?

They can coexist with the main contract, even if they contradict it Signup and view all the answers

When do collateral contracts usually take place?

During the negotiation phase of the main contract Signup and view all the answers

What is the impact of collateral contracts on the rights and obligations of the parties involved?

They can contradict the terms of the main contract Signup and view all the answers

Who elaborated on the principle of collateral contracts in the case of Tan Chong & Sons Motor Co (Sdn) Bhd v Alan McKnight?

Salleh Abas FJ Signup and view all the answers

What is the trend in legal jurisprudence regarding oral promises made during contract negotiations?

A growing acknowledgment of their significance Signup and view all the answers

What should take precedence when oral representations conflict with or defy the terms of the written contract?

The oral representations Signup and view all the answers

What is the relationship between collateral contracts and the main contract?

Collateral contracts can coexist with the main contract, even if they contradict it Signup and view all the answers

What was the contention of the plaintiffs regarding the exceptions to section 92?

To allow the admission of pre-contractual representations and oral agreements Signup and view all the answers

What was the High Court's decision regarding the entire agreement clause?

It prevented the parties from relying on oral representations and attempting to vary the terms of the contract Signup and view all the answers

What did the High Court consider in relation to the entire agreement clause?

The existence of a collateral warranty Signup and view all the answers

What was the effect of the entire agreement clause on the collateral warranty?

It rendered the collateral warranty ineffective Signup and view all the answers

What was the outcome of the High Court's decision regarding the agreement?

The agreement was terminated by the defendants Signup and view all the answers

What case did the High Court consider in relation to the collateral warranty?

Tan Swee Hoe Co Ltd v Ali Hussain Bros Signup and view all the answers

What did the parties agree to by signing the entire agreement clause?

To exclude oral representations and agreements Signup and view all the answers

What did the High Court hold regarding the parties' intention in signing the entire agreement clause?

The parties intended to exclude oral representations and agreements Signup and view all the answers

Study Notes

Implied Terms in Contracts

Implied terms are terms that are not explicitly stated in the contract but are understood to be part of the agreement.
They can arise from various sources, including the parties' intentions, statutory provisions, common law principles, industry customs, or previous dealings between the parties.
Implied terms are crucial for ensuring that contracts are complete, fair, and workable, even if certain details were not explicitly discussed or written down by the parties.

Express Terms vs. Implied Terms

Express terms are in writing, whereas implied terms usually derive from oral negotiations.
Express terms are terms that the parties have specifically negotiated and agreed to include in the contract.
Implied terms are terms added to the contract by the law or based on the facts of the case.

Obvious/Officious Bystander Test

A method used by courts to determine whether a term should be implied into a contract.
The court considers whether a term is so obviously necessary for the contract to function properly that it would be assumed by both parties, even though it's not explicitly stated in the contract.

Parol Evidence Rule

The parol evidence rule, embodied in Section 92 of the Evidence Act 1950, prohibits the admission of oral evidence that contradicts or varies the terms of a written agreement.
Evidence of oral assurances may be admitted if it constitutes a collateral contract.

Collateral Contracts

Collateral contracts are used to address situations where one party relies on oral assurances made by the other party during negotiations, even though those assurances are not included in the written contract.
Collateral contracts can sometimes contradict the terms of the main contract.
The significance of this concept lies in how courts treat such contradictory agreements and their impact on the rights and obligations of the parties involved.

Recognition of Collateral Agreements

Raja Azlan Shah CJ in Tan See Hoe Co Ltd v Ali Hussain Bros highlighted the recognition that collateral agreements can coexist with the main contract, even if they contradict it.
This indicates a growing acknowledgment within legal jurisprudence that oral promises made during contract negotiations can hold significant weight, potentially superseding written terms.

Entire Agreement Clause

The entire agreement clause in the written contract serves to restrict the parties from relying on oral representations or attempting to vary the terms of the contract through oral agreements.
The High Court held that the entire agreement clause precluded the existence of a collateral warranty and prevented the formation of collateral warranties that contradicted the terms of the written contract.

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Description

This quiz focuses on implied terms in contract law, which are terms not explicitly stated in the contract but are inferred from various sources such as usage and custom, previous course of dealings, intention of the parties, statute, and common law.