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Questions and Answers
What is the first type of implied term in contracts?
What is the first type of implied term in contracts?
Which type of implied term arises from specific cases as established by previous court decisions?
Which type of implied term arises from specific cases as established by previous court decisions?
Which of the following is NOT a mechanism through which terms can be implied in a contract?
Which of the following is NOT a mechanism through which terms can be implied in a contract?
What is NOT an implication about the role of courts regarding implied terms?
What is NOT an implication about the role of courts regarding implied terms?
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What type of implied term relies on the usage of a particular market or trade?
What type of implied term relies on the usage of a particular market or trade?
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An implied term inferred by statute is determined by:
An implied term inferred by statute is determined by:
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Which statement best describes the nature of implied terms in contracts?
Which statement best describes the nature of implied terms in contracts?
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How do courts typically handle implied terms from prior decisions?
How do courts typically handle implied terms from prior decisions?
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What is the primary purpose of implying a term in a business transaction?
What is the primary purpose of implying a term in a business transaction?
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In The Moorcock case, what was implied in order to provide business efficacy?
In The Moorcock case, what was implied in order to provide business efficacy?
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What does the concept of 'officious bystander' refer to in a legal context?
What does the concept of 'officious bystander' refer to in a legal context?
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In the Easton v Hitchcock case, why could no term be implied regarding the P.I. job's secrecy?
In the Easton v Hitchcock case, why could no term be implied regarding the P.I. job's secrecy?
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What is often the main implication of a contract's terms to ensure business efficacy?
What is often the main implication of a contract's terms to ensure business efficacy?
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What is necessary for a custom to be implied in a contract?
What is necessary for a custom to be implied in a contract?
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Which of the following criteria is NOT required for a custom to be implied?
Which of the following criteria is NOT required for a custom to be implied?
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In the context of custom, what does the term 'notorious' mean?
In the context of custom, what does the term 'notorious' mean?
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Which case illustrates that specific contractual terms can override a custom?
Which case illustrates that specific contractual terms can override a custom?
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What does the criterion 'certain' imply about a custom?
What does the criterion 'certain' imply about a custom?
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What must a custom be to be binding in a contract where it is implied?
What must a custom be to be binding in a contract where it is implied?
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What is an example of a custom that was recognized in a case?
What is an example of a custom that was recognized in a case?
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What does it mean when a custom is labeled as 'reasonable'?
What does it mean when a custom is labeled as 'reasonable'?
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Which test is NOT used to imply terms in a contract?
Which test is NOT used to imply terms in a contract?
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In the context of contract law, what does 'judicial notice' refer to?
In the context of contract law, what does 'judicial notice' refer to?
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Which of the following statements is true regarding the Evidence Act?
Which of the following statements is true regarding the Evidence Act?
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What does the 'intention of the parties' aim to evaluate in a contract?
What does the 'intention of the parties' aim to evaluate in a contract?
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Which of the following is considered a requirement for a custom to imply a term in a contract?
Which of the following is considered a requirement for a custom to imply a term in a contract?
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Which type of implied term requires that parties must have intended to include it in the contract?
Which type of implied term requires that parties must have intended to include it in the contract?
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According to the context, which option best describes the 'officious bystander test'?
According to the context, which option best describes the 'officious bystander test'?
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What is the first test to fix the intention of the parties in an implied term according to MacKinnon LJ?
What is the first test to fix the intention of the parties in an implied term according to MacKinnon LJ?
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What is a necessary condition for a term to be implied in a contract?
What is a necessary condition for a term to be implied in a contract?
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Which of the following statements about implied terms by operation of law is accurate?
Which of the following statements about implied terms by operation of law is accurate?
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What is an implied term in relation to goods purchased as per the Sale of Goods Act 1957?
What is an implied term in relation to goods purchased as per the Sale of Goods Act 1957?
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In the context of contract law, what does the House of Lords assert about the intent of the parties?
In the context of contract law, what does the House of Lords assert about the intent of the parties?
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What is indicated regarding the completion date of Phase III in the discussed contract?
What is indicated regarding the completion date of Phase III in the discussed contract?
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What is implied by the contract between Shirlaw and Southern Foundries regarding Shirlaw's directorship?
What is implied by the contract between Shirlaw and Southern Foundries regarding Shirlaw's directorship?
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What common reaction would parties have if someone suggested to add an express provision for implied terms during contract negotiations?
What common reaction would parties have if someone suggested to add an express provision for implied terms during contract negotiations?
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How do the officious bystander test and the business efficacy test differ?
How do the officious bystander test and the business efficacy test differ?
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When analyzing a contract, what must be considered according to the intention of parties principle?
When analyzing a contract, what must be considered according to the intention of parties principle?
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In the case of Trollope and Colls Ltd v N.W.Metro, what was the primary issue with the timing of the phases of contract completion?
In the case of Trollope and Colls Ltd v N.W.Metro, what was the primary issue with the timing of the phases of contract completion?
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What principle is notable about implied duties in Malaysia according to the context provided?
What principle is notable about implied duties in Malaysia according to the context provided?
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During contract formation, what stance is taken regarding provisions that are obvious and go without saying?
During contract formation, what stance is taken regarding provisions that are obvious and go without saying?
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What does the statement 'the contract must be read as a whole' emphasize?
What does the statement 'the contract must be read as a whole' emphasize?
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Study Notes
Implied Terms
- Implied terms are those not explicitly stated in a contract, but are understood to be part of it.
- Implied terms can arise through custom, statute, or by courts.
- Courts cannot create better contracts for parties.
Introduction to Implied Terms
- When a written contract is silent, implied terms may be included.
- These implied terms can be established through custom, statute, or by the courts.
- Courts aren't responsible for improving a contract's terms for the parties involved.
Types of Implied Terms
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Inferred by courts: The most important type, where the court infers (deduces) terms from evidence that the parties intended those terms to be included in the contract, even though they weren’t explicitly written.
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Inferred by statute/law: A large body of implied terms emerges from decided cases where courts have established specific terms in response to specific circumstances. Courts in related situations apply the same understanding (ratio decidendi) without re-evaluating each case.
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Inferred by custom or trade usage: Implied terms based on customary practices in a specific market or trade. Reasonable practices become implicit parts of contracts in that industry, unless explicitly contradicted by the contract.
Implied by Custom
- If a custom exists, it can be implied into a contract, whether it's expressly stated or not.
- Implied customs are valid so long as the written contract doesn't contradict them.
- The custom should reflect the intended agreement of the contracting parties.
- Section 92(e) of the Evidence Act often applies. Annexed usages or customs commonly included in contracts are valid if they are consistent with the express terms of the contract.
- A standard example of how a custom is deemed invalid is the Produce Brokers Co. Ltd. case. In that situation, customs cannot be applied if there are specific contractual provisions that would yield a distinct interpretation of the contract or that contradict the very custom itself.
Criteria for Implied Customs
- Certain: The custom should be clearly established.
- Notorious: It should be widely known in the relevant industry or market.
- Reasonable: The custom must be consistent with sound business principles.
Case Examples
- Cunliffe-Owen v Teather & Greenwood: Established criteria for determining if a usage amounts to a recognized trade practice, including principles like "usage," "certain," "notorious," and "reasonable."
- Lee Eng Joo v Kok Boon Keng: Illustrates cases where custom was not recognized, highlighting issues of uncertainty, lack of notoriety, and unreasonableness.
- Pembangunan Maha Murni Sdn Bhd v Jururus Ladang Sdn Bhd: Explains procedural specifics of how customs and usages are legally proven in Malaysian jurisprudence. Direct evidence, series of similar instances, proof in similar trades, and ancient practice are methods.
- De Cruz v Seafield Amalgamated Rubber Co. Ltd: Demonstrates where contractual knowledge of usage is mandatory for it to become part of the agreement. If knowledge of the custom is missing, the parties are not bound by it.
Implied Terms by Courts
- Terms are implied in the contract to provide meaning and efficiency to the agreement.
- Courts use various tests to determine whether to imply a term.
- Business efficacy test: A term is implied to give the contract business efficacy, making it usable and reasonable. Business efficiency would be negatively affected without the term.
- Officious bystander test: A term is implied if a hypothetical bystander would assume the term was already understood and included by the contracting parties. This is often used in conjunction with business efficacy (when a term is implied for efficiency).
- Intention of the Parties test: Implied terms depend on the original intent of the parties during the contract's creation. The contract is examined in totality.
Case Examples
- The Moorcock: A fundamental case illustrating the business efficacy test, where the contract was implied for the jetty to be safe for the ship.
- Easton v Hitchcock: Shows how courts consider knowledge, secrecy, and whether a term is necessarily implicit in the contract.
- Shirlaw v Southern Foundries: Demonstrates the application of the officious bystander test to imply a term related to job tenure.
- Trollope and Colls Ltd v N.W. Metro: Illustrates how consideration of contractual intention from the original time of contract creation is essential when deciding what terms were implied.
- House of Lords (in Trollope case): Explained that the courts look only at the written agreement and the intentions inherent in the contract's structure.
Implied by Law (Statute/Cases)
- Certain laws, like the Sale of Goods Act 1957, implicitly apply certain terms to contracts of goods.
- An example of a term included by statutes is "goods bought are free from encumbrances."
Implied Undertakings (as to Title, etc)
- In sale contracts, unless explicitly stated otherwise, a seller implies guaranteeing rightful ownership and quiet possession of goods, free from any third-party encumbrances.
Implied Conditions (Quality or Fitness)
- In describing sale contracts, there are implications regarding quality criteria. A seller implicitly warrants the merchantable quality of goods if purchased by description. The buyer can confirm quality, with the exception of visible defects. Specific conditions involving fitness for a particular purpose are included where the buyer made known their needs to the seller regarding the purpose for which it is for.
Summary of Implied Terms
- To imply a custom, the contract must be silent regarding the custom, and the custom shouldn't contradict the contract.
- The custom itself must be certain, notorious, and reasonable.
- The requirements of implicit knowledge are scrutinized.
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Description
Explore the concept of implied terms within contracts, including how they arise and their significance. This quiz covers the types of implied terms, including those inferred by courts and statutes. Understand the limitations of courts in redefining contract terms.
