Implied Terms in Contracts

The terms of a contract are the specific agreed terms and any implied terms.  Implied terms serve at least two purposes. First they fill gaps–no contracts can allow for all eventualities.  Second, implied terms allow regulation of the performance and enforcement of contracts.   But implied terms will always be overruled by specific contrary terms.   There are at least three different kinds of implied terms.

–    Obligations implied in all contracts e.g. the obligations of cooperation and good faith;
–    Obligations implied in particular types of contract. Such obligations are to found in the sale and leasing of real estate, the sale of goods, employment contracts, contracts of agency and partnerships;
–    Obligations implied in specific contracts.

This third class is where problems are most likely to arise.   Take the situation where  a contract is silent on a particular point.  Is it or is not possible to imply a term which resolves the point. The rules for implying a term in a specific contract are clear. For a term to be implied the term:

–    must be reasonable and equitable;
–    must be necessary to give business efficacy to the contract;
–    must be so obvious that “it goes without saying”;
–    must be capable of clear expression;
–    must not contradict any express term of the contract;