Introduction to Implied Terms in Contracts

Terms that are not explicitly written in a contract but are assumed to exist based on common understanding, custom, or legal rules.

When the written contract doesn't say anything about a specific condition, courts can imply terms based on accepted practices in the relevant industry.

Laws that automatically insert certain terms into contracts, even if not mentioned, to ensure fairness and protect parties.

Courts can infer based on evidence that parties must have intended certain terms to be in the contract, even if they were not written.

Courts cannot create a better contract for the parties than what they intended, but they can fill in the gaps to make the contract fair.

Certain implied terms are decided in past case rulings and applied to similar situations. Courts usually follow these precedents.

A type of Implied Term that arises from common practices in a particular industry or market.

Implied terms must be reasonable and cannot contradict the express terms of the contract.

A custom can be implied in a contract even if it's not explicitly mentioned, as long as the contract is silent on the matter, the custom doesn't contradict express terms, and it reflects the parties' intentions.

The Evidence Act allows for customs or usages to be implied in a contract if those customs aren't explicitly stated but are regularly attached to similar agreements. These implied customs must not conflict with the contract's express terms.

A primary rule in contract law states that a custom cannot be implied if the contract already has specific terms that either contradict or give a different meaning to the custom.

A custom that can be implied in a contract must meet three criteria: it must be clearly established, widely known among those in the relevant industry, and reasonable.

This case highlights the 'certain' aspect of custom, meaning it must be well-defined and not open to interpretation. It also stresses the 'notorious' criterion, implying the custom must be widely accepted and known in the respective market.

This case explores the 'reasonable' aspect of an implied custom. If a custom is unreasonable, it's unlikely to be accepted as part of a contract. This highlights the importance of fairness.

A custom that is not clearly defined, not widely known, or not reasonable is unlikely to be accepted as an implied term in a contract.

Customary practices can be implied into contracts unless they conflict with the express terms of the agreement. Therefore, understanding the specific terms of the contract is crucial for determining if a customary practice applies.

A legal concept that implies a term into a contract to ensure the transaction makes practical business sense, as the parties likely intended. This implied term prevents the transaction from becoming pointless or inefficient.

A ship owner (P) made an agreement with a jetty owner (D) to unload his ship at the jetty. However, during low tide, the ship got stuck and damaged. The court ruled that an implied term existed that the jetty must be safe for ships to use, even though it wasn't explicitly stated in the agreement.

A private investigator (P) was hired to conduct surveillance on a client's husband. The investigator (Davis) was hired for a short period. The agency (P) was not responsible for the former investigator's action of disclosing the surveillance status to the client's husband. The court ruled that no implied term could be created in this case.

A legal concept that describes a term that is so obvious and essential to a contract that it goes without saying. It often overlaps with the concept of business efficacy.

A legal concept that highlights how it's difficult to imply a term into a contract if the situation is outside the control of one party. The court in this case did not imply a term that the former investigator is bound to keep the surveillance a secret as the agency had no control over the former investigator.

The court focuses solely on the contract's content to understand the parties' intentions at the time of agreement.

A term can only be implied if it was intended by the parties, even if not explicitly stated.

Inferred by legislation or legal precedent, these terms are not based on the parties' intentions.

A custom is a widely accepted practice in a particular trade or industry. It can be proven by evidence of consistent application, similar customs in other locations, or historical recognition.

To apply a custom to a contract, it must be certain, notorious, and reasonable. Certainty means it's clear and consistent. Notorious means it's well-known. Reasonableness means it's fair and just.

The 'business efficacy' test asks whether the implied term is necessary to make the contract work in a practical sense. Is it essential for the deal to be carried out properly?

The court considers the intentions of the parties to see if they intended to include the implied term in the contract. What did each party believe was being agreed upon?

Terms are implied in a contract to make the agreement complete and ensure it makes sense. They are like unspoken rules that help the contract work in practice.

The intention of the parties at the time the contract was made is considered when determining implied terms. This means examining the context and circumstances surrounding the contract to understand what the parties intended.

The entire contract needs to be analyzed to determine if an implied term is necessary. This means considering the contract as a whole and not just isolated parts.

A term implied into a contract that binds the parties to act in good faith and with fairness towards each other. This means avoiding actions that would undermine the contract's purpose or the other party's interests.

Hewlett-Packard (M) Sdn Bhd & Anor v Agih Tinta Sdn Bhd is a Malaysian case that established that there is no implied duty of good faith.

The officious bystander test is broader in scope compared to the business efficacy test. The officious bystander test focuses on general reasonableness and obviousness, while the business efficacy test specifically focuses on the ‘business’ aspects of the contract.