Contract essentials — 6 June 2013

When interpreting a contract, it’s not just the express terms of the contract that are important. Careful consideration should also be given to implied terms. It is important to know when terms will be implied, how they will work alongside the express terms in the contract and when they can be excluded. Terms might be implied into a contract for a number of reasons, including to reflect the intentions of the parties at the time the contract was entered into, to achieve fairness between the parties or to fill a gap in a contract so that the contract works in practice.

The court may imply a term into a contract based on: usage or custom; the parties’ previous course of consistent dealing; the intention of the parties, known as a term implied ‘in fact’; common law, where the implied term is a necessary part of a particular type of contract; or statute, for example the Sale of Goods Act 1979 (which implies terms as to the quality of goods supplied and their fitness for purpose).

The recent case of Mid Essex Hospital Services NHS Trust v Compass Group UK and Ireland Ltd (trading as Medirest) (2013) highlights the reluctance of the courts to imply terms into a contract where express terms will suffice…

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