Package includes:

Online CPD Module  l  Booklet  l  PowerPoint Presentation

Package Fee (incl GST)

• $149 - NZLS members and Associate members
• $179 - Non-members

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Online CPD Module

Presentation time: 90 minutes

When will the court impose contractual terms on parties that they have not written into their legal contracts? Often, contracting parties are surprised to learn that the terms of their agreements go further than they had thought.

On the other hand, on occasion they may be disappointed to be told that a court is unlikely to bind a counter-party to something that they believe is obvious. The courts will imply terms in a range of different circumstances.

It is essential, when advising on the meaning of contracts, to have a clear understanding of how, and when, an implied term might arise.

Sometimes the parties negotiating a contract inadvertently fail to consider or properly to record an important issue which may come back to bite them later.

In this module the presenters will:

• Provide an overview of how the courts are currently approaching the exercise of the implication of terms into commercial contracts
• Discuss the practical implications for advising your clients both when drafting contracts and when they are faced with a situation in which alleged implied terms of a contract are in dispute.

Learning objectives 

You will gain:

• A high level overview of how the law relating to implied terms has developed.
• An understanding of how the courts decide whether a term should be implied into a contract.
• An appreciation for how the courts’ approach to the implication of terms should impact on how lawyers advise their clients – both when drafting and negotiating commercial contracts and when advising them on disputes relating to the terms of their contracts.

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Booklet

Authors: Seb Bisley, Amy Ryburn
Published: 12 April 2017
Pages: 28

Introduction

No matter how carefully drafted a contract may be, circumstances will arise within contractual relationships that are not expressly covered by the relevant contract. The parties may have reached agreement on the important terms of the contract, and decided to leave the remaining details to the Court if they arise, or (more frequently) have failed to turn their minds to some contingency. In either case, there is a gap in the terms of their contractual relationship.

For example, a contract for the sale of a second-hand car may not contain any warranty as to the quality of the car. A contract for the development of (say) a procurement system may not expressly address who owns the intellectual property in that system. A contract that an employer will meet an employee's university fees, but will forgive the debt after five years of employment, may not provide that the employer will not unreasonably bring the
employment relationship to an end during the five-year term.

What does it mean for the parties if the contract is silent? As Lord Hoffman observed in
Attorney General of Belize v Belize Telecom, the most usual inference where a contract is
silent as to the effect of a particular event is that nothing is to happen upon the occurrence
of that event.¹ But, in some circumstances, the courts will imply a term to fill the gap. They
will order that, despite the contract being silent, something is to happen, that some
contractual right or remedy is engaged by the event.

As Lady Hale explained in Geys v Société Générale [2013] 1 AC 523 at [55], there are two kinds of implied term. The first, sometimes called a term implied “in fact”, is a term that is implied into the contract as a matter of construction of the contract.² It is this category of implied term which, we think, has proved the most contentious and least predictable, and which continues to attract judicial and academic commentary and debate.

The second type of implied term arises where the law (either statutory or common) imposes a term into certain types of relationships. Common examples are non-residential leases, and contracts for the sale of goods. They are sometimes described as terms implied by law (although, as we will see, they share some significant similarities with terms implied in fact). That second kind of term is, in many text-books,³ broken down into two further categories: terms implied by custom (ie, by the common law) and terms implied by statute.

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1 Attorney-General of Belize v Belize Telecom [2009] 1 WLR 1988, at [[17].
2 The phrase "construction of the contract" is, here, intended to encompass both the process of construction described
by Lord Hoffman in Attorney-General of Belize v Belize Telecom [2009] 1 WLR 1988, and the re-formulation adopted by the majority of the English Supreme Court in Marks and Spencer plc v BNP Paribas Securities Services Trust Company (Jersey) Ltd [2015 UKSC 72.
3 See, for example, Burrows, Finn and Todd, The Law of Contract in New Zealand (5th ed, Lexis Nexis, 2016) at 194.

PowerPoint Presentation

These are the slides included in the presentation.
Number of Slides: 23