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Contents of a contract essay

The law recognizes both types of the contents of a contract, that is, expressed and implied and has its implication when looked from the Customary, Common law, and Statutory perspectives. But, before discussing the implication of the implied contents of a contract under different legal perspectives, there is a need to comprehend the core meaning of the terminology ‘implied content of a contract’.

The Definition
The dictionary (Cobuild, 1996) meaning of implied is, “something which indirectly indicates that it is the case”. A synonym for the same is also implicit, which means implied but not expressed. Thus we need to read between the lines or to find it, as it is not physically expressed in the contract.

A dictionary of law (Osborn’s Concise, 1993) provides the following definition of the implied term: “A term in a contract which has not been expressively stated but which the courts are willing, or required by statute, to imply.

A ministry of the New Zealand government’s also interprets the implied terms as an unstated part of a contract. According to them “implied terms are most commonly implied by statute – ie, that kind of contract is covered by a particular Act. eg, contracts for the sale of goods will have an implied term which guaranteed that goods will be of acceptable quality; the contract does not have to specifically mention the Customer Grantee Act”.

Parker and Box in their book (2000), provides the following interpretation of the term implied:

An implied term is thus one which is not written into the written contract, spoken in the formation process of the oral contract, nor written or spoken in the case of a contract which is partly written and partly oral. It must be found outside the actual contract and read into the contract by implication.

All of these definitions are at least unanimous on two distinctive features of the implied terms in contract: First that implied terms are part of the contract, even though they may not be expressed in written words in the contract, like an express terms which are clearly stated in contract; secondly implied terms are to be found outside the written contract but still within the contextual framework of the contract.

Apart from these features mentioned above, the implied term has also another strong characteristic, that is, its relevance to the customary obligations prevailing between and among contractual parties and the place where the contract is being made. For instance, law accepts that all customary obligations, not altered by the contract, are to remain in force that is too late to pursue a contrary course; and would be of much inconvenience if the set practice were to be disturbed (Smith and Thomas, 1977).

The above comprehensions of the implied terms suggest three possible ways in which a term may be implied into a contract:

1. Because of a custom or convention in a particular trade
2. The court considers that the parties wanted it, and would have included it if they had thought about it, or that it is needed to make the contract work
3. The term might have to be included, or shall be considered implicit in the contract because of statutory requirements, even if the parties do not want it to be included in writing.

Application and implication of the term implied:
To clearly distinguish between the different types of implied terms we refer to some of the known cases in the law:

Use of it under the Common Law:
As stated earlier the implied term has a strong relevance to the customs and norms of the customary obligations prevailing between and among contractual parties and the place where the contract is being made. The following famous “The Moorcock” case highlights this concept (for detail of the case please refer to Court of Appeal 1889, 14 P.D. 64; 58 L.J.P. 73; 60 L.T. 654; 37 W.R. 439):

An Annotated Summary: “The Moorcock”:
The owner of a wharf agreed with the owners of “The Moorcock” to berth the vessel, a barge, at their wharf to unload it, against a fee. The wharf was in river Thames, and both parties knew that at low tide, the vessel would ground on the river bed. The Moorcock did eventually grounded on the bed and was extensively damaged; as a result the owner sued the wharf owner for damages. The claim was successful, as the judge considered that reasonable care could have been provided by the wharf owner for the reason of business efficacy, giving a commercial realism to the contract, that when the wharf owner gave permission to the barge owner to berth, the implied term was there in the contract that the river bed was safe (adapted from Parker and Box, 2000).

However, need is there to take proper consideration before considering that the implied term is there in the contract as per norms of the customary obligations, such as industrial convention. For instance, in the following case an attempt to imply a term into contract failed:

Annotated Summary: “Summers v Commonwealth of Australia”
Summers contracted to supply a quantity f marble for use in the construction of Australia House in London. Some of the marble blocks were oversized and the cost for the same was withheld. When Summers sued to claim the cost of the oversize blocks, he referred to the industrial convention that oversize blocks are normally included in supply on the understanding that they could be satisfactorily reduced in size to meet the specifications. His claim was rejected as the implied term was directly conflicting with an express term included in the contract, which referred to the specification of the block sizes to be supplied. (Adapted from Parker and Box, 2002).

A court can also imply a term into a contract based on prior dealings between the two parties. This normally happens when the disputing parties have dealt with each other and on a particular current occasion a usual term or a condition is omitted from the current contract. For instance, in the “Hillas & Co Ltd v Arcos Ltd” case the court allowed the appellants to buy a further 100,000 standards of softwood in 1931 based on the dealings in 1930 during which 22,000 standard softwood was agreed to be bought, subject to certain conditions. The decision to allow the appellant to buy further softwood was based on an option clause, which is referred to as an “agreement to make an agreement” – an interpretation of Lord Parker in Von Hatzfeldt-Eildenburg (Princess) v. Alexander. (Adapted from Smith and Thomas, 1977).

The option clause is not considered to be enforceable agreement in general as it is uncertain and imprecise. However, the term can be saved by reference to the detailed contract in which it was located. (Adapted from Parker and Box, 2002).

The discussion above lead to an understanding that while preparing or entering into a contract, the parties cannot escape their lawful responsibilities, if a term, which is implied, has not been expressed in full, or in part, in writing in a contract. The “implied term” acts as an invisible hand to protect the rightful party to ensure business/commercial realism remain in practice. This realism may be based on the understanding of prior dealings between or among the same parties or may be an interpretation of cultural/industrial practices/norms, and/or be part of an understanding which could not be delineated properly at the time of writing the contract.

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