English Contract Law - The courts' implied terms
Courts, as a matter of policy, imply terms into contracts. The courts assume such agreements on two basic grounds: terms implied in law and terms implied in fact. Terms that are implied by law In law, terms are implied in order for the contract to function as the courts judge is necessary (a 'necessary incident'). Furthermore, there have been examples when the courts have implied provisions into specific types of contracts. For example, the courts implied into employment contracts that the employer must not act in a way that is likely to harm or damage the employer-employee relationship of confidence and trust. In fact, implicit terms In fact, terms are implied where the court believes it is necessary to do so in order for the contract to work. The following tests are used by the courts to reach their decisions: the 'officious onlooker' test the 'business efficacy' test. The 'officious bystander' test This test refers to a phrase that, if suggested by a 'officious bystander' monitoring the process, the parties in negotiation would totally agree with. Alice and Billy reached an agreement in which Billy committed to purchase Alice's land parcel for £3,000 if Alice opted to sell it. Alice then gave the tract of land to his sister. Can Billy sue Alice for breach of contract? Yes, the answer is yes. Gardner v Coutts & Co [1968] WLR 173 has similar facts to this scenario. If an unscrupulous bystander had been there when Alice made the arrangement with Billy, he would have implied a provision that the agreement to grant Kennedy the right to buy the property plot also prohibited him from selling it to anybody else. The 'business efficacy test This criteria refers to a term that is required for the contract to work as the parties must have objectively intended. Alice made a deal with Billy River Ports so that he could berth his yacht at Billy docks. Alice and Billy River Ports were both aware that when the tide ran out, the boat would come to rest on the riverbed. When the tide went out, Alice's boat was damaged since it was resting on the riverbed's rough surface. Darren looks at his contract with Billy River Ports, but there is no provision stating that the riverbed is acceptable for boats to land on. Can Alice rely on the courts to insinuate a condition into his contract with Billy River Ports stating that the riverbed was safe for his boat to rest on when the tide went out? Yes, the answer is yes. The facts in this scenario are similar to those in The Moorcock (1889) 14 PD 64, in which the Court of Appeal determined that the parties must have intended to contract on the premise that the jetty owner took reasonable care to ensure that the riverbed was safe for the boat when the tide went out. The court interpreted the contract to mean that the dock owner would take reasonable precautions to guarantee that boats may be moored safely at the dock.
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