Introduction
In the law of contract, the content of an agreement is determined by its terms. While parties often expressly state the terms that will govern their relationship, the law also recognises that other terms may be incorporated into a contract without being explicitly mentioned. These are known as implied terms. Implied terms can be categorised as those implied in fact, by custom, or by law. This essay will focus on terms implied by law, explaining their function and providing key examples from both common law and statute. Terms implied by law are not based on the unexpressed intentions of the specific parties to the contract, but are instead imposed by legal rule into certain categories of contract as a matter of policy, regardless of whether the parties would have agreed to them.
Terms Implied by Law at Common Law
The courts may imply a term into a contract as a matter of law where it is a necessary incident of a definable category of contractual relationship. This power is exercised based on wider considerations of policy, fairness, and the nature of the contract itself, rather than trying to ascertain the presumed intentions of the parties. The leading authority on this point is Liverpool City Council v Irwin [1977] AC 239. In this case, tenants in a council tower block withheld their rent, arguing that the council had breached its obligations by failing to maintain the common parts of the building, such as the lifts and staircases, which were frequently vandalised. The tenancy agreement was a simple document that detailed the tenants' obligations but was silent on the landlord's obligations for maintenance.
The House of Lords held that it was necessary to imply a term into the tenancy agreement that the landlord should take reasonable care to keep the common parts in a reasonable state of repair and usability. Lord Wilberforce stated that the court was not concerned with searching for the parties’ intentions, but with defining the obligations that arise from the nature of the relationship between a landlord and tenant in a high-rise block. The term was implied because it was a necessary incident of such a tenancy. However, on the facts, the council had taken reasonable steps to maintain the property, and so had not breached this implied duty. The case clearly establishes that the test for implying a term in law is one of necessity for the particular type of contract, a less stringent test than that required for terms implied in fact (McKendrick, 2023).
Terms Implied by Law by Statute
Parliament has been a more significant source of terms implied by law, particularly in the context of protecting parties with weaker bargaining power, such as consumers. These statutory implied terms set a minimum standard of contractual performance and cannot generally be excluded by the parties.
A primary example is the Sale of Goods Act 1979 (SGA 1979), which applies to business-to-business contracts for the sale of goods. The Act implies several important terms into such contracts. Section 13 implies a term that the goods sold will correspond with their description. Section 14(2) implies a term that the goods supplied are of "satisfactory quality," which includes their fitness for common purposes, appearance, freedom from minor defects, safety, and durability. Furthermore, section 14(3) implies a term that the goods will be reasonably fit for any particular purpose made known to the seller by the buyer.
For contracts between a trader and a consumer, the Consumer Rights Act 2015 (CRA 2015) now governs the implication of terms. The CRA 2015 largely mirrors and modernises the protections previously found in the SGA 1979 and other statutes. For example, section 9 of the CRA 2015 provides that goods must be of satisfactory quality, section 10 requires them to be fit for a particular purpose made known by the consumer, and section 11 requires that they be as described. These statutory interventions are based on a clear policy objective: to provide a basic level of protection for buyers, ensuring they receive goods that meet a reasonable standard, thus promoting fairness and confidence in commercial transactions.
Conclusion
In summary, terms implied by law are a crucial component of English contract law, operating to supplement the express agreement of the parties. They are not based on the parties' intentions but are imposed as a matter of legal policy. The courts have exercised this power sparingly, implying terms only where they are a necessary incident of a particular contractual relationship, as seen in Liverpool City Council v Irwin. More extensively, Parliament has used statute, such as the Sale of Goods Act 1979 and the Consumer Rights Act 2015, to imply terms into common contracts to protect weaker parties and ensure minimum standards of quality and fairness are met. These implied terms therefore play a vital role in regulating contractual relationships and redressing potential imbalances of power.
References
- McKendrick, E. (2023) Contract Law. 15th edn. Bloomsbury Publishing.
- Liverpool City Council v Irwin [1977] AC 239.
- Sale of Goods Act 1979.
- Consumer Rights Act 2015.
